#8
Kommersant
December 5, 2001
RUSSIA HAS STOPPED GROWING
November statistics paint a gloomy economic picture
Author: Nikolai Vardul
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
YESTERDAY THE ECONOMIC DEVELOPMENT MINISTRY OFFICIALLY RELEASED SOME SAD NEWS. THE MINISTRY HAS CALCULATED THE STATISTICS FOR NOVEMBER AND COME TO THE CONCLUSION THAT THE ECONOMIC SITUATION IN RUSSIA HAS STOPPED IMPROVING. ONLY A FEW DAYS AGO, THE PRIME MINISTER HAD BEEN TALKING OF ECONOMIC SUCCESS.
Yesterday the Economic Development Ministry officially released some sad news. The ministry has calculated the statistics for November and come to the conclusion that the economic situation in Russia has stopped improving. The halt may turn out to be a rather long one.
On November 30 Prime Minister Mikhail Kasianov addressed the Duma on the success of the Cabinet's economic policies. He said, "After a long period of stagnation, set-backs, and a chain of crises, our economy has at long last acquired some positive momentum for growth. This is too precious an achievement for us to compromise it with any risks, including those connected with world energy prices - things which do not depend on us." The prime minister assured the Duma of this, and the budget was passed in the third reading.
But then subordinates of the prime minister from the key state economic body calculated that economic growth stopped in October, allowing for seasonal fluctuations.
There has been much loud and obviously politicized talk recently of to what extent the economy of Russia depends on oil prices. There were enough of those willing to demonstrate their indifference toward world oil prices. Presidential economic adviser Andrei Illarionov even drew up a formula according to which a decrease in oil prices by one dollar stimulates the Russian economy by 0.9% of the GDP. And Economic Development Minister Herman Gref, despite the modest wishes of deputy prime minister and finance minister Alexei Kudrin, refused to reconsider the budget for next year. And it is he who can be held responsible for the pause in economic growth, as well as for the impracticality of the 2002 budget.
However, Gref can appeal to the fact that the Russian economy's dynamics are very strange. In particular, he can note that last year, against a background of rising oil prices at the end of the year, economic growth stopped. At that time it was explained by exhaustion of the devaluation effect. Now they speak of oil prices falling against the background of the real ruble exchange rate, which is in the process of firming.
But one more thing remains to be seen: why was the previous halt in economic growth, which lasted until February 2001, resolved? The official answer is support of investments, which increased by 17% in 2000. In 2001 the growth of investments, starting from very small figures, has slowed down. There are calculations revealing another source of economic growth - producer prices lag behind consumer prices. The reason for the gap is the slow increase in the tariffs of natural monopolies. But as early as the first quarter of the coming year this will be blocked - at first according to the government plans, coordinated with natural monopolies, prices for gas and electricity will rise, then railroad tariffs will increase too. Inflation will join the halt in economic growth. It may push demand for some time, but not investments, which means that the halt in growth may become prolonged and turn into a crisis.
(Translated by Daria Brunova)
Next Article