Economy turns corner as focus turns to year ahead
The worst scenario for Russia in 2009 – the collapse of the financial system, massive bankruptcies and a surge of unemployment – thankfully never occurred.
Next year economists see modest recovery in Russia. According to the IMF, GDP will grow by 3.5 percent. Merrill Lynch is more optimistic – up to 5 percent due to high oil prices, according to Yulia Tseplyaeva Chief Economist at Merrill Lynch
“Oil price will be higher next year, 85 for Brent and 83 for Urals. That’s a comfortable price for Russia’s development. We see Russia’s growth next year at 5 percent and 4.2 in 2011. It’s a clear economic recovery but not to pre-crisis growth rates.”
But risks are still there. According to Russia’s Finance Minister Aleksey Kudrin – the main one is capital outflow.
“The withdrawal of stimulus measures and growing refinancing rates may result in capital outflow from the emerging markets. This means that part of the funding will flee from our stock market.”
Next year should answer yet another question – which sectors may provide economic growth after stimulus packages are wound up. The government doesn’t seem to have an answer but Pyotr Aven, Head of Alfa Bank says Russian bankers are ready to help out.
“Give the money to private banks, otherwise the government will spend it anyway and it will be a disaster. Because they will simply be guessing where to allocate the money.”
However Russia’s banking sector has not yet fully recovered from autumn's storm. Bankers say a growing bad loan portfolio is a serious threat, while the central bank's rate cuts have done little to boost lending.
Prime Minister Putin has urged banks to cut rates to 6% next year. Market participants say that can happen only if inflation falls first. The current forecast for 2010 is 8%.
However, if the economy requires further massive monetary and fiscal stimulus, inflation may easily climb back into double figures.