World Bank positive appraisal for Russian economy

The World Bank has lowered forecast for Russian consumer price growth anticipating the inflation to slide to a projected year end level. Pedro Alba, World Bank Country Director for Russia talked to RT on up sides and down sides of the Russian economy

RT:  How important is it for Russia to tackle its relatively high inflation?

PA:"Well, I think its very important and I think that first thing we need to think is that inflation is like a tax, particularly taxes on those whose incomes don’t go up with inflation, so it’s like a tax on the incomes to the clients – particularly pensioners and others. I think the other part of inflation if you think of it as you live; I think Russia wants to become like a global market for its currency financial center and inflation is actually a “no-no” if you want to have a stable currency with low inflation rates to be able to attract international investors. I think for Russian ambitions it is important to bring the inflation down."

RT: What makes the bank appear more positive about Russia?

PA:"It is a pretty broad question, but first thing on the inflation side we see government has, also the Central Bank, takes a series of measures both on reducing liquidity and also increasing interest rates and the M2, the money supply growth is coming down to rates which are more consistent with nominal income growth. I think the other side of….course is Russia’s grain and other food production issues that is expected to be more favorable so that will also help to bring down inflation. More generally I think our prospects for Russia are positive because of the efforts that the authorities are trying to do in the business climate, increasing competition. These are important areas which I think will also improve Russia’s performance on the supply side and also reduce inflation that way." 

RT: Russia's leaders have long wanted to see the rouble as a global reserve currency – or at least a regional one. What's your opinion on this?

PA:"I don’t know if t is possible or not. I think it could be. But I think more important you need to look at most of the efforts that authorities will do to make the rouble more attractive as a reserve currency is good for the country in general. I think it is a very interesting objective it’s a challenge which is always important for objectives. In this way they will be able to tackle, they will tackle the serious, important impairments in capital markets both on the infrastructure side of the capital and also some of the issues regarding corporate governance and the business climate also making Moscow a different city. All these things are actually good for everybody. It’s an interesting objective in that sense"

RT: What downsides of Russia's economy do you see as slowing it down? 

PA: "I think Russia’s key issue always is its dependence on oil. It is something recognized by everybody, so the downside always is what are your options when oil prices go down from their current levels, and they will, they always have and they always will come down. I think that the biggest challenge for Russia is to diversify, attract new investors, and bring new production. I think that’s probably the most important downside or challenge for the economy."