Official website of the President of Russia

 

Presidential Aide Arkady Dvorkovich: The President has held a meeting on economic issues, which focused on the main results of the year, particularly on certain aspects: the main development trends in particular industries, inflation, the banking sector, and the short-term prospects and forecasts.

In particular, the meeting participants discussed the issue of capital flight and its main causes, basic interpretation and factors. The topics of liquidity in the banking market, interest rates and currency exchange rates were also addressed.

The overall assessment is that the situation is relatively stable. The banks, the Central Bank and the Government have sufficient reserves to pursue a balanced macroeconomic policy, while the situation in Europe and the world gives on the whole causes for concern.

In addition, the conversation centred on the instruments that will be applied if the situation deteriorates, and if the European crisis begins to have a more serious impact on our market and our economy. Those were the main issues.

Question: What are the basic instruments?

Arkady Dvorkovich: The main instruments are under the control of the Central Bank and the Government. The Central Bank will increase the liquidity using different instruments, which were created during the crisis in 2008 and 2009: some of them are still in use, some have been suspended and they may be re-introduced if necessary. At present there is no need for them, but the situation will be constantly monitored and decisions will be made.

As you know, the Government has earmarked some funds in the budget (which were not allocated for the current programmes) so that decisions can be made in the future. In the first quarter, the Government will analyse this issue on a continual basis, whether to use the funds for some new programmes or to implement anti-crisis policies should a need arise as a result of the recession in Europe.

Question: Do you expect the GDP growth to slow down in 2012 below the forecast due to the European recession? What do you expect the average ruble exchange rate to be, and can the political protests affect it?

Arkady Dvorkovich: With regard to economic growth, if the slowdown in demand for our products will be moderate and oil prices do not fall sharply, the growth rates are likely to remain close to the current ones.

If the recession spreads to the entire global economy or to most of it, the slowdown may be more significant. However, we are not considering the possibility of a sharp downturn as part of any reasonable scenario.

As for the ruble, the currency corridor is gradually expanding, we have experienced significant fluctuations in the currency market, but we have no fear that the exchange rate will go beyond the reasonable bounds set by the Central Bank. I repeat, there are sufficient reserves, and in this sense, the situation is stable.

Currently the capital outflow has the greatest influence on the exchange rate, and it's a more important factor than any political sentiments. Capital outflow is associated with a wide variety of events, from the situation in Europe to corruption. It is also one of the causes of capital flight. We must tackle these causes in different ways.

In any case, we expect that the resolution of political uncertainty will gradually lead to the decrease in the capital outflow or even its return after a certain period, but not in the short term.

Question: Do you think that capital outflow may be associated with the upcoming presidential election?

Arkady Dvorkovich: Political uncertainty always affects the outflow of capital, but it is not the only factor and may not even be the most important one. The main factor, which the President has repeatedly highlighted, remains a poor investment climate.

People do not feel that their property is fully protected. There is uncertainty about possible changes to the tax rate. There is also a problem in the global economy in addition to our poor investment climate.

The political situation is only the third factor that influences capital outflow and which could accelerate it this year. This factor will be removed one way or another in March 2012.

Question: Did the meeting touch on Strategy 2020?

Arkady Dvorkovich: No, Strategy 2020 will be discussed for the first time at a meeting to be chaired by the President in mid-January.

Question: In the worst-case scenario of global economic development, what are your forecasts for the decline in GDP growth?

Arkady Dvorkovich: Even in the worst-case but still reasonable scenario, we will have some growth, although minimal, below 1%.

In the mild recession scenario, if oil prices remain at $90 to $100 per barrel (these are tentative numbers), economic growth is likely to be about 3%.

Bear in mind that the current baseline forecast for next year is an average of $100 per barrel.

Question: In the context of a possible recession, which seems quite likely, is Russia planning to intensify its BRICS contacts in any way?

Arkady Dvorkovich: These contacts are very active, and in Cannes the leaders agreed to establish even closer ties between Finance Ministries, central banks, among top-level experts, experts on economic policy and on coordinating actions in the global economy. These contacts have already been activated.

Question: Has the Government learned any lessons from the story with the Bank of Moscow and with multi-billion dollar bailouts? What conclusions can be drawn?

Arkady Dvorkovich: The meeting participants also discussed a wide range of issues related to the banking sector, the analysis of individual transactions, including dubious transactions that occur in the banking system. Many banks experience problems of this kind, and sometimes the banks are obliged to act on their clients’ instructions.

Agreement has been reached that the working group, which was set up two or three years ago to coordinate the actions of law enforcement, fiscal and financial authorities in this area, will intensify its efforts and monitor more closely banking transactions, tax mitigation and other similar activities.