Worst of economic crisis still ahead in Russia
Posted: 06 June 2009 0311 hrs
Dmitry Medvedev
SAINT PETERSBURG : Russia has still not passed the worst of the economic slowdown and faces a second crisis wave, a minister warned Friday, clouding the mood at the country's premier economic conference.
Long-serving Finance Minister Alexei Kudrin -- known for his blunt straight talking -- said at the Saint Petersburg Economic Forum that Russia was set to face problems due to bad loans made by banks to struggling companies.
His comments were more pessimistic than an earlier speech by President Dmitry Medvedev who had nonetheless warned it was too early to pop the champagne corks to celebrate an economic recovery.
"In the presentations of the main speakers, I did not hear it said that the bottom has been reached. The president has said that we are at the worst point but it is unclear how long it will last," Kudrin said.
He went on to tell Russian state television that because of the problems created by bad loans "a second crisis wave is unavoidable."
"But we will be able to solve this by recapitalising the banks," he added.
According to a recent report by Moody's ratings agency, the level of non-performing loans in Russia was 11 percent of banks' total portfolio and could reach 20 percent by the end of the year.
Medvedev said that while the world economy had been showing signs of revival, "in my opinion it's too early to crack open the champagne."
A Kremlin official told AFP that as an expert on the economy, Kudrin was at liberty to make any prediction he wished.
The president also warned that ridding banks of bad assets and loans was in the short term "the most serious challenge for us and other countries."
Russia will use other means such as injecting state money into the banks to solve the problem, he said. Medvedev spoke out against the creation of a "bad bank" to handle such toxic assets.
In talks with international energy companies, he promised that Russia would look at providing fiscal stimulus for oil and gas firms once the "acute phase" of the crisis was over.
"If all we do is survive the crisis, then we will be set back years, and if another crisis appears it risks being more dramatic than the one we are experiencing now," Medvedev added.
Russia's economy, dependent on exports of hydrocarbons and raw materials, was hit badly by the global economic slowdown and the government is forecasting a six-to-eight percent contraction in GDP this year compared with 2008.
The prime task of Medvedev and Prime Minister Vladimir Putin has been to avoid any hint that the economy is approaching a meltdown similar to the 1998 crisis when Russian defaulted on sovereign debt.
"I very much fear that Kudrin is close to the truth," commented Viktor Vekselberg, one of Russia's richest men and a co-owner of British-Russian oil firm TNK-BP.
"We will be running a fever for a bit yet. We just need to arm ourselves with patience. Russia has huge potential," he told reporters.
Russia's richest man, Mikhail Prokhorov, praised Medvedev's speech, saying that "the ambition of our country is not only to overcome the consequences of the crisis but also to go forwards."
The Russian central bank has cut interest rates three times since the end of April in a bid to stimulate the struggling economy and Kudrin said that more cuts would be on the way amid declining inflation.
"If inflation gets to 10 percent then by the middle or end of next year interest rates could reach 10 percent," compared to the current 11.5 percent, Kudrin said.
Prospects for the Russian economy remain hugely dependent on the price of oil which currently stands at around 69 dollars a barrel after plunging from record highs above 147 dollars last July.
Deputy Prime Minister Igor Sechin told the conference that 75 dollars a barrel would be an acceptable price crude price from Russia's point of view.
"We need an oil price of at least 75 dollars a barrel and then production projects can develop and if there is not that price then they will not develop," he said.
Posted: 06 June 2009 0311 hrs
Dmitry Medvedev
SAINT PETERSBURG : Russia has still not passed the worst of the economic slowdown and faces a second crisis wave, a minister warned Friday, clouding the mood at the country's premier economic conference.
Long-serving Finance Minister Alexei Kudrin -- known for his blunt straight talking -- said at the Saint Petersburg Economic Forum that Russia was set to face problems due to bad loans made by banks to struggling companies.
His comments were more pessimistic than an earlier speech by President Dmitry Medvedev who had nonetheless warned it was too early to pop the champagne corks to celebrate an economic recovery.
"In the presentations of the main speakers, I did not hear it said that the bottom has been reached. The president has said that we are at the worst point but it is unclear how long it will last," Kudrin said.
He went on to tell Russian state television that because of the problems created by bad loans "a second crisis wave is unavoidable."
"But we will be able to solve this by recapitalising the banks," he added.
According to a recent report by Moody's ratings agency, the level of non-performing loans in Russia was 11 percent of banks' total portfolio and could reach 20 percent by the end of the year.
Medvedev said that while the world economy had been showing signs of revival, "in my opinion it's too early to crack open the champagne."
A Kremlin official told AFP that as an expert on the economy, Kudrin was at liberty to make any prediction he wished.
The president also warned that ridding banks of bad assets and loans was in the short term "the most serious challenge for us and other countries."
Russia will use other means such as injecting state money into the banks to solve the problem, he said. Medvedev spoke out against the creation of a "bad bank" to handle such toxic assets.
In talks with international energy companies, he promised that Russia would look at providing fiscal stimulus for oil and gas firms once the "acute phase" of the crisis was over.
"If all we do is survive the crisis, then we will be set back years, and if another crisis appears it risks being more dramatic than the one we are experiencing now," Medvedev added.
Russia's economy, dependent on exports of hydrocarbons and raw materials, was hit badly by the global economic slowdown and the government is forecasting a six-to-eight percent contraction in GDP this year compared with 2008.
The prime task of Medvedev and Prime Minister Vladimir Putin has been to avoid any hint that the economy is approaching a meltdown similar to the 1998 crisis when Russian defaulted on sovereign debt.
"I very much fear that Kudrin is close to the truth," commented Viktor Vekselberg, one of Russia's richest men and a co-owner of British-Russian oil firm TNK-BP.
"We will be running a fever for a bit yet. We just need to arm ourselves with patience. Russia has huge potential," he told reporters.
Russia's richest man, Mikhail Prokhorov, praised Medvedev's speech, saying that "the ambition of our country is not only to overcome the consequences of the crisis but also to go forwards."
The Russian central bank has cut interest rates three times since the end of April in a bid to stimulate the struggling economy and Kudrin said that more cuts would be on the way amid declining inflation.
"If inflation gets to 10 percent then by the middle or end of next year interest rates could reach 10 percent," compared to the current 11.5 percent, Kudrin said.
Prospects for the Russian economy remain hugely dependent on the price of oil which currently stands at around 69 dollars a barrel after plunging from record highs above 147 dollars last July.
Deputy Prime Minister Igor Sechin told the conference that 75 dollars a barrel would be an acceptable price crude price from Russia's point of view.
"We need an oil price of at least 75 dollars a barrel and then production projects can develop and if there is not that price then they will not develop," he said.
