Experts: Russia is not facing a crisis of scale 1998

Experts: Russia is not facing a crisis of scale 1998


MOSCOW, January 14. /Corr. Nikita Zharkov/. The quality of crisis management in Russia and low level of debt will help Russia to avoid a crisis of the scale of 1998, even at low oil prices, experts say.

Two days in a row the participants of the Gaidar forum discussed the macroeconomic situation in Russia, comparing it with the crisis period of 1998-1999. This topic on the first day of the forum asked the Minister of Finance of the Russian Federation Anton Siluanov, not excluding the repetition of the 1998 crisis in the absence of measures to adapt the budget to the new economic conditions. According to him, it is now necessary to bring the budget in line with new realities, otherwise the population, as in 1998-1999, “pay” through inflation over the lack of budget adjustment.

“Siluanov’s statement, I think the idea is that if you do not cut costs a few years, and the price of oil remains low, then later the costs will have to be reduced simultaneously, causing uncontrollable contraction of consumption and GDP,” – said the Minister of Finance chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin.

A different story

At the Gaidar forum opinion Siluanov was parried by the head of audit chamber Tatyana Golikova, stating that the current economic situation has nothing to do with 1998, It believes that there are certain risks associated with the execution of the budget in 2016, which was recently adopted. “But it seems to me that the main problem lies in the fact that and what steps we should take and in what time frame to fulfill or correct the approved law entitled of the law literally in December 2015”, – said the head of the accounting chamber.

The economic situation in Russia now is significantly different from 1998, Golikova agree with the experts. “While the situation certainly is different. Duty in those days was much more, so the pressure from external debt now is not that strong as before. Other things being equal, the situation is different, but the desired proactive response to changing environmental conditions,” says chief economist for Russia and CIS Bank of America Merrill Lynch Vladimir Osakovsky.

By the end of 2015, the external debt of Russia amounted to about 14% of GDP and volume of international reserves of the Central Bank on January 1, 2016 – 368 billion. For comparison, the results of 1998, the external debt amounted to about 148% of GDP, and the volume of international reserves at 1 January 1999 – 12.2 billion dollars.

“While we have very modest debt, which, in General, poses no threat to the budget. Costs – Yes, we are inflated, but there are countries much more crazy than we are. We are not the most evil country in this regard. And in principle there is an understanding that we need to rewind a little bit back and optimized,” adds the Director nyfi of the Ministry of Finance of Russia Vladimir Nazarov.

Oil around the head

Low oil prices were discussed during the second day of the Gaidar forum. According to the former Minister of Finance of the Russian Federation, the Chairman of the Committee of civil initiatives Alexei Kudrin, Russia should be ready for the interval rates in the 20-30 dollars per barrel, in such a case, any price increase above this range, according to Kudrin, will be for the country, “premium bonus”. According to him, oil prices will remain low for a long time, and in an optimistic scenario will be in the corridor of 40-60 per barrel in the next 5-7 years.

According to the Minister of Finance Anton Celonova, Russia should be ready for any changes in the price of oil, including to 30 dollars per barrel. Only from the beginning of 2016, the price of Brent fell by nearly 20%, falling below 30 dollars a barrel for the first time since April 2004, the Parallels with 1998 asking again – then the price of Brent fell below $ 10 per barrel. According to the Finance Ministry, recovery of oil prices may occur in the second half of the year, but in 2016 the price is unlikely to exceed $ 50 per barrel. During the adjustment budget, the Ministry proposes to focus on the average annual price of oil in 40 dollars for barrel.

The main problem in 1998, and now is the reduction of budget revenues due to the fall in oil prices, said the head of the Economic expert group Evsey Gurvich. “Siluanov is, I think, meant that if we won’t cut spending, we’ll just spend the Reserve Fund while oil prices will remain low, in a year or maximum one and a half Reserve Fund will be exhausted. Then find ourselves in a situation very similar to the situation in 1998” – says Gurvich.

Managed crisis

Despite the difficult situation in the economy the level of crisis management will not allow Russia to repeat the 1998 crisis even in the face of low oil prices, says chief economist for Russia and CIS “Renaissance Capital” Oleg Kuzmin. “Until we have a quality crisis management cannot be compared with the 1998 period, therefore we hope that such a crisis will not happen,” he said.

Speaking on the second day of the Gaidar forum, the head of the Duma Committee on budget and taxes Andrey Makarov said that the current situation in the economy, in all its complexity, is characterized in that neither the President nor the Prime Minister not trying to belittle the problems facing the economy.

“Everything is in our hands. If not we will pursue the same policy as in 1998, we will not repeat the experience of those years. If we were to conduct the same policy, and then to incur debt, not to reduce costs, to take on populist commitments that cannot be fulfilled, then Yes, again,” says the nyfi Director of the Ministry of Finance of Russia Vladimir Nazarov.

See also

Gaidar forum. Second day. Text translation