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St. Pete forum discusses possible recession in Russia

June 21, 2013, 10:08 UTC+3

Speakers and participants in discussions focused on investments, banking sector and crisis signs in the Russian and global economy

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The St. Petersburg International Economic Forum started its work on Thursday. Delegates to the three-day forum have to clarify, when a recession can be expected in Russia. Government officials seem optimistic, while experts do not rule out a negative scenario of development. Economists hope that the forum will draft anti-crisis recipes.

Speakers and participants in discussions focused on investments, banking sector and crisis signs in the Russian and global economy, the Novye Izvestiya daily reported. Chairman of Business 20 (B20) Organizing Committee Alexander Shokhin regretted that recommendations of the business community that are being developed at such forums are not always taken into consideration by the governments.

Russian Economic Development Minister Andrei Belousov said recession risks still remain, but there is no recession, the RBK business daily wrote. First Deputy Prime Minister Igor Shuvalov sounded even more optimistic. On Thursday he announced with confidence that Russia is not being battered by recession. President of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin, expressed not so much optimism. “I think that those fussy moves and statements of the Finance Ministry and the Central Bank mean that first, there are great concerns showing that recession risk is real and second, there is no consistent plan of actions how to curb this recession and what incentives can stir up economy. These two circumstances mean that it is quite possible that recession will hit Russia in autumn,” he said.

The forum’s main event was a public battle between governmental supporters and opponents of a stable rouble, the Kommersant business daily wrote. For an hour Economic Development Minister Andrei Belousov has been confronting a stronger team of opponents - German Gref, Alexei Ulyukayev and Elvira Nabiullina at the congress hall of the St. Petersburg International Economic Forum, but then finally gave in.

Sberbank’s session “Are central banks the last stronghold of economic growth?” should have become the forum’s pivotal session, the daily wrote. A range of measures to support economic growth discussed by the Russian White House and the Kremlin for the first time over the past year have been containing the Economic Development Ministry’s proposal to reduce the real rouble exchange rate and impose responsibility on the Central Bank for economic growth and to introduce indicative rates for loans - this kind of proposals has never been discussed by the government. Without waiting for decisions to be taken by the authorities the rouble has been devaluating itself for the third day running. And nobody knows whether the talk is about unsuccessful intervention of the regulator or about the beginning of the implementation of Mr. Belousov’s programme.

Sberbank CEO German Gref put the question to vote: what will maintain the economic growth? Exporters of raw materials, who, as Gref explained, benefit from the weak rouble, probably, left the hall - a weakening of the rouble exchange rate was supported by 1.69 percent of the voters. Reduction of state monopolies’ tariffs was supported by 16.1 percent, a decline in banking rates, which as the Andrei Belousov team believes Russia’s industry needs, gained support of 14.41 percent. The rest (67.8 percent) demanded better investment climate.

Some experts console themselves with hope that possibly, after the forum the government will develop a more concrete position on economic stimulus, Nezavisimaya Gazeta wrote. “The GDP growth rates mainly slow down for two reasons - an export decline and high interest rates. In my opinion, it would be a good decision to reduce the rouble rate against the bicurrency basket to 38 roubles, as this will allow to raise competitiveness of Russian goods,” Investcafe analyst Timur Nigmatullin said. “Hesitancy in the government’s actions is explained by the fact that the rouble’s devaluation will increase the price of imported equipment and technologies for industrial modernization. Moreover, devaluation may provoke discontent in the population over consumption decline.”

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