MOSCOW, January 12. /TASS/. The economic policy pursued by Russian authorities over the last two years was appropriate and saved the country from disruptive instability, First Deputy Managing Director of the International Monetary Fund David Lipton told TASS in the interview.
During a very tough decade, Russian policymakers have done an impressive job maintaining economic stability #GaidarForum2017 pic.twitter.com/XXqT5VrXjy
— David Lipton (@Lipton_IMF) 12 January 2017
"I think that policy that had been set have been appropriate over the past 2 years and have saved Russia from the kind of instability Russia has experienced in the past and that had been very disruptive. Policy always has to react to events in the world and events in the world are uncertain at this point. So if things change in the global economy they will have to react," Lipton said.
"I think that setting of policies right now, meaning an inflation targeting regime that the Central Bank aimed at getting at 4% and the use of fiscal rule to try to keep the public finances of the country on track, these are the right policies," he added.
The International Monetary Fund considers the Central Bank’s efforts to bring inflation down following the oil prices plunge to be an important accomplishment:
"First, I want to say that I think that what Central Bank has done to bring inflation down following the oil price decline, the ruble depreciation and its impact on inflation, has been a very important accomplishment. Those events had possibility of destabilizing the finances of Russia and the Central Bank's actions have prevented that from happening in conjunction with the management of fiscal policy, which has also been I think appropriately cautious."
Meanwhile, Lipton said, the regulator is on track to hit its 4% inflation target by the end of this year.
"I think that they are close to achieving their goal. Whether at the end of 2017 inflation is a little above or a little below 4%, they are on a track to make that achievable. It's very hard to know a year ahead of time what exactly the inflation rate will be because to use the example again in case of Russia, oil price developments could affect the headline inflation rate for a period. But I think that setting this goal and making sure that it's achieved over the medium term is a very important way to ensure the stability of the Russian economy," he said.
The future of Russian economy
The average annual growth of the Russian economy in the next five years will be 1.5%, but it makes sense for the country to strive for higher growth rates, Lipton believes.According to the IMF forecast released in October 2016, the global economy will grow by 3.4% in 2017 and by 3.8% in 2021.
At the same time the IMF expects Russia’s GDP to grow by 1.1% in 2017, by 1.5% in 2021 which is 2.5 times slower than the global economic growth.
"I think it makes sense for Russia to aspire to higher growth rate. I think our forecast right now, 5-year growth forecast for Russia, which is based on present policy, have growth only averaging about 1.5%. So, we believe that for growth to be higher will require some policy change and some structural changes that will boost potential of the economy. We think that's the right thing to do. And so we certainly agree that planning to make changes to achieve higher growth is the right goal," Lipton said.
According to him, the last few years were quite tough for Russia: "the growth has been low with oil prices declining and sanctions being imposed."
"During that period Russian living standards have stopped converging to European levels. And with 1.5% growth, which is our present forecast for the next 5 years, Russian living standards wouldn't converge at all because European growth is about the same 1.5%. So I think if Russia wants to be catching up to the living standards elsewhere in the advanced world it has to aspire to more rapid growth and find ways to achieve it," Lipton said.
IMF has recommended that Russia increase the tax burden on materials sectors for replenishing the budget.
"As far as the tax system is concerned, there's been a lot of tax reforms but really quite important changes have been made. This is part of the process. That's probably a process that should continue. We think that there should be over time more rents paid on natural resources to support the budget, greater reliance on indirect taxes rather than on direct taxes. There are a series of improvements that can be considered over time," Lipton said.
Read the full interview here.