As growth trend strengthens and inflation continues to fall IMF chief gives Russia's economic management high marks.
As Russia’s economy continues to put on growth, and as annualised inflation in Russia falls to a post-Soviet low of 4.2% at the start of this month, the Russian government’s handling of the Russian economy has come in for high praise from IMF chief Christine Lagarde.
Her comments about the skill with which the Russian government has handled the dual problems of the 2014 oil price crash and the sanctions could scarcely be more fulsome
We see the Russian economy growing after those few years of difficult times…..
When the price of oil went very suddenly, from almost sometimes I think more than $100 per barrel, to a low, $27/$28 per barrel, the response by the Russian economy was very comprehensive. They took the right fiscal measures. They kept inflation under control. They adopted a very good monetary policy, which included the floating of the currency, making sure that the financial sector was stable.
Indeed Russia’s handling of the economic storms which assailed it in 2014 could serve as a text-book case study of how a modern economy should handle such storms. Not only have the Russian government’s actions (as Lagarde says) been comprehensively vindicated by events, but they have confounded Western predictions of what would happen to Russia’s economy, nearly all of which predicted disaster.
There is still a widespread reluctance in the West to acknowledge this. Western commentators continue to talk of the Russian economy as if it was still in crisis or recession, when it is actually growing, and continue to point to the low rate of growth the economy is achieving at this early point in its recovery, when interest rates are still high, and when the emphasis is still less on growth than on inflation reduction.
All I would say about that is that it would have been scarcely conceivable to most economic commentators in 2013, when oil traded at $110 a barrel and Russia’s inflation rate was 6.48%, that Russia’s economy would be growing again, and running a budget deficit of no more than 1.5% of GDP with an annualised inflation rate of 4.2%, less than three years after the West imposed economic sanctions cutting Russia off from the West’s financing, and after the price of oil more than halved in value, plunging to a low of $27 a barrel in the first weeks of 2016, with the oil price today still no more than $55 a barrel. This after only a brief recession, in which the deepest contraction in 2015 was no more than 2.9% of GDP.
This is not to say that Russia’s response to the crisis has been flawless. The fact that inflation this year now looks certain to fall below the Central Bank’s 4% target appears to confirm my longstanding view that monetary policy during the recession has been far too tight. However the overall direction of policy – floating the rouble, restraining monetary policy and holding down the budget deficit – has been well-judged and must be counted a success.
The task for the government now is to move forward to consolidate the results which have been achieved, paving the way for higher non-inflationary growth in the future.
WASHINGTON, April 17. /TASS/. The International Monetary Fund (IMF) proceeds from the fact that the Russian economy has moved back to positive zones of growth, Managing Director of the IMF Christine Lagarde said in an exclusive interview with TASS.
"We see the Russian economy growing after those few years of difficult times," she said speaking ahead of the spring sessions of the IMF and World Bank in Washington, which are to take place on April 21-23.
According to her, the IMF highly appreciates the steps the Russian authorities took during the rocky financial and economic conditions of recent years.
"When the price of oil went very suddenly, from almost sometimes I think more than $100 per barrel, to a low, $27/$28 per barrel, the response by the Russian economy was very comprehensive. They took the right fiscal measures. They kept inflation under control. They adopted a very good monetary policy, which included the floating of the currency, making sure that the financial sector was stable," she remarked.
"And that helped the country move from a very difficult crisis, where the oil prices divided by four, and the sanctions that applied as a result of the invasion of Crimea, the Russian economy was exposed. But it gradually moved from those negative territories back in 2015/2016, into what we believe is going to be positive territories now in 2017," Lagarde said.
The IMF Managing Director did not specify the organization’s new estimates for Russia, she only said that it concerns the growth of "more than one percent."
As it became known to a TASS correspondent from sources in the IMF, the organization expects the Russian economy to grow by 1.4% per year in 2017 and 2018.
The IMF’s new estimates and forecasts for Russia and the world will be officially made public on Tuesday, April 18.
Huge respect for Russian culture
"As a French National and a lover of literature and music, I have huge respect for Russian culture. Culture, history, and the arts of the country," Lagarde noted.
She pointed out the similarities between French and Russian culture and great influence of the French philosopher and writer Voltaire had on both of them.
Lagarde named Leo Tolstoy and Fyodor Dostoyevsky among her favorite writers and Sergei Rachmaninoff as one of her favorite composers.
"I’m saying that not to flatter you or to compliment Russia, but I think it’s very much part of the country as it is today, and the aspiration and ambition of its people today. It is fueled and fed by these very deep roots into your culture, and your geography is also equally important, I think, to understand the country, the distance, the richness of resources. All that explains the very complex great nation that Russia is," she said.
In that context the IMF Managing Director also said that she meets Russian President Vladimir Putin "on a regular basis at many of those meetings around the world."
"We have had several very deep and good conversations to understand better the country and its economic policies," she said.
Christine Lagarde has been head of the IMF since July 5, 2011. Last year, she entered her second five-year term at the organization. As the IMF Managing Director Lagarde visited Russia in 2011, after the G20 summit in Cannes. She met with the Russian President more than once at international forums, including the meetings of the G20 leaders.