In order to resolve the difficult economic problems faced by the world (and first of all by developed countries) it is necessary to introduce deep structural reforms, to overcome the disbalances accumulated in the world, and to develop a new growth model. 2010 was the year when an active discourse on this new model was started on the global arena, and a special term Ц New Normal Ц for defining the subject of that discourse was coined in the USA1.
Among the issues to be tackled are the ratios and relationships between Western and Eastern economies (first of all, the USA and China) and between Northern and Southern ones (especially within the framework of the EU). If these issues are to be resolved, it is necessary to rectify the worldТs macroeconomic disbalances (and first of all those affecting the international balance of payments).
An adequate model of global financial regulation should be developed, because it has now become clear to everyone that the biggest threat to global stability comes from the financial sphere. And it is equally apparent that, in conditions of globalization, financial flows cannot be regulated exclusively under national jurisdictions.
The powerful social sectors of developed countries (including Russia) should be restructured, starting with their pension and health care systems that were established and took shape in conditions of the Industrial Era. These system have proved to be inefficient in face of postindustrial challenges (both demographic and purely economic ones).
See Yudaeva K., New Normal dlia Rossii [A New Normal for Russia] // Ekonomicheskaia Politika [Economic Policies]. 2010. No 6.
RUSSIAN ECONOMY IN trends and outlooks A new international currency system should be formed, and it should be clearly understood which currencies should play the role of world ones. Meanwhile, when resolving this issue, it would be necessary to avoid currency wars and a currency-devaluation race Ц something that very nearly happened in the autumn of 2010, when the world was teetering on the brink.
The to provide adequate solutions to all those problems will be a time-consuming process.
It must be admitted that more time will have to be spent on intellectual comprehension of the adopted decisions and on mapping up some alternative action plans than on the actual decision-making. It is precisely these issues that will become the focal points during the new phase of the crisis Ц the phase that began in 2010 and will continue throughout 2011.
1.1.2. RussiaТs economic policy between crisis and modernization In 2010, Russia in the main continued its economic policies pursued over the previous year. However, this time the emphasis was made not on the bailing out of some individual economic agents (enterprises or banks), but on the maintenance of general economic and social stability. Banks and firms began to repay their debts to the State. At the same time, there was a resumption of growth in the size of external debt of big businesses (unlike the situation observed in previous years, credits were predominantly drawn by non-financial enterprises).
Russia once again experienced economic growth, although its rate was much lower than in 2000 Ц 2010. As in the previous years, RussiaТs growth rate was higher than in developed countries but lower than in the other BRIC countries Ц China, India and Brazil. To be fair, the severe slump at the peak of the crisis (9 % of GDP and almost 15 % in industry) made the issue of economic recovery much more urgent than before. The task of making Russia one of the five world leaders in GDP volume by the year 2020 also became much more difficult.
Below, we will focus our attention on the most grave problems that were influencing the economic development of Russia during last year. Accordingly, these problems will necessarily become the focal points of RussiaТs economic policy both at present and in the nearest future.
First. We are faced with a considerable aggravation of the financial (budgetary) situation.
After nearly a decade, Russia once again has to deal with budget deficit. After the 1989-financial crisis which culminated in the 1998 default, the RF Government started to treat budgetary issues with extreme caution. As a result, it succeeded in achieving a balanced budget. Among the factors conducive to this achievement, there was a steady rise in oil prices. For some time, a balanced budget was the symbol of post-communist Russia and almost a rallying point for the new elite. By the time of the onset of the crisis, the intensive repayment of the external debt had made Russia one of the least indebted countries of the world. Certainly, there existed certain political forces in Russia that insisted on an increase in budget expenditures, but their political influence was negligible.
Now the situation has changed. The country experienced a budget deficit in 2009, but no catastrophe took place. The elite understood that it could gain access to far greater profits than those generated by advances in labor productivity and a favorable external market environment. As a result, there has emerged a paradoxical situation: we have a budget deficit despite the average annual price of oil having climbed to almost 80 USD per barrel, while several years ago, when oil was traded at 30 USD per barrel, the federal budget was implemented with a surplus.
From a formal point of view, the situation by no means looks alarming. State debt levels remain low, and the country has ample room for borrowing Ц both in rubles and foreign curSection 1.
The Socio-Political Context rencies. In comparison with developed countries, RussiaТs budget deficit of 3.5 Ц 4 % of GDP is not very high. However, if we eliminate the rent component of the federal budget, the budget deficit will stand at about 13 % of GDP. Which means that the country depends extremely heavily on the fluctuations of world prices for energy carriers Ц that is, on the factors that are completely beyond RussiaТs control.
The situation is quite comparable with that of the early 1980s. At that time, the Soviet system seemed to be absolutely stable, and the USSR economy was slowly but steadily growing (at an annual rate of 2 Ц 3 %). State debt levels were not high. Proceeds from the sale of energy carriers were spent on covering budget expenditures (first of all, military expenditures, purchases of foodstuffs and consumer goods, and purchases of imported equipment for the purposes of further development of the oil and gas sector). That model was considered to possess a long-term Ц if not altogether permanent Ц potential for stability, and in accordance with their knowledge of the worldТs historical experience with oil prices the Soviet authorities were confident that the price of oil could only be on the rise. However, when oil prices demonstrated a six-fold plunge, it took only five years for the cherished stability to turn into a complete financial disaster. The same risks are still very real today. The only difference is that, unlike in the early 1980s, we are now well aware of the fact that oil prices are capable of moving in both directions.
Second. After the rate of inflation dropped in 2009 and in the first half of 2010, the CPI resumed its growth and reached 8.8 % by the end of the year. In other words, RussiaТs inflation rate remains one of the highest in the G-20. It is comparable only with the rates of inflation in India and Turkey (Table 2).
Table Consumer Price Index, as a percentage of the previous year 2007 2008 2009 Russia, according to OECD 9.0 14.1 11.7 Е Russia, according to Rosstat 11.9 13.3 8.8 8.G7 2.2 3. Ц0.1 Е Turkey 8.8 10.4 6.3 8.India 6.4 8.3 10.China 4.8 5.9 Ц 0.7 4.6 (RBC) Brazil 3.6 5.7 4.9 5.Spain 2.8 4.1 Ц 0.3 1.Greece 2.9 4.2 1.2 4.USA 2.9 3.8 Ц 0.4 1.UK 2.3 3.6 2.2 3.Canada 2.1 2.4 0.France 1.5 2.8 0.1 1.Sources: OECD, IMF, RBC, Rosstat.
To some extent, this is a absolutely natural process following a resumption of economic growth. Although the dynamics of prices began to decelerate at the peak of the economic slump, the Russian economy continued to be highly inflationary Ц the bottom point of the slump saw the rate of annual inflation dropping to 8.8 %. As the recession abated, it was from that lowest point that RussiaТs inflation resumed its climb.
However, RussiaТs inflation is also fed from two other Ц so to say, negative Ц sources. One of them is the factor created by the drought and the extremely poor harvest of cereals, which reflects on the whole index of agricultural production. The second source is the factor of budgetary policy, because the current very strong rise in expenditure cannot but boost prices.
RUSSIAN ECONOMY IN trends and outlooks The current wave of inflation has also had some monetary sources, for the budget deficit was financed from the Reserve Fund and by foreign currency interventions during the capitalinflow period at the beginning of the year. Some contributions to the rise in inflation also came from the inflationary expectations inevitably produced by an expansionary budgetary policy.
Given the current situation in Russia, a rise in inflation has created more problems for this country than for its developed counterparts. In developed countries, inflation would have become a factor (and indicator) of a rebound in production, and even the subsequent tightening of monetary policy would have been limited to only a few percentage points. In Russia, inflation must inevitably raise interest rates to double digits, thus creating a serious obstacle to economic growth.
In this situation, it was only reasonable to expect that Russian firms would considerably increase borrowing on external markets that offered cheaper loans. Such expectations indeed proved to be well-substantiated. In 2010, foreign borrowing began to climb, especially on the part of non-financial institutions (unlike in the pre-crisis period).
Third. Russia has been hit by massive capital outflow. In this respect, the situation in Russia is totally different from that existing in the other BRIC countries, because Brazil, India and China are experiencing strong capital inflows. In both cases there emerges the issue of advisability of restricting the freedom of capital movement, although the purposes of such restrictions would be diametrically opposed to each other Ц to reduce the impetus for capital inflow for the purpose of lowering the level of volatility in one case (e.g., Brazil has already introduced a Tobin tax), or to do this for the purpose of preventing a dangerous capital outflow in the other.
Capital outflow from Russia was taking place despite that fact that the Russian stock market was one of fastest growing stock markets in the world. However, its small size (the inflow of portfolio investments constitutes only a small part of capital flows), small depth and extremely high volatility (it can fluctuate many-fold) have made big international investors lose interest in it. To make matters worse, the amount of direct investments registered last year was negligibly small.
Apparently, the current capital outflow from Russia has several causes. One of the reasons is the general uncertainty concerning the forthcoming Russian elections. Another reason is persistently high corruption, when part of the funds spent by budgets of all levels of government remains in the hands of СofficialsТ who prefer to transfer their loot to safer havens (as is confirmed by the relatively small money transfers abroad typical of the past year). As far as the latter tendency is concerned, it can be said that corruption is visibly evolving from being a microeconomic phenomenon into a macroeconomic factor.
At the same time, the current account balance rapidly has been decreasing due to a considerable rise in imports caused by a rise in the social expenditures of the budget. High effective demand transforms into demand for cheap goods. Currently, Russia is importing most of such goods. It has become clear that a 1999-like situation Ц when growth in nominal payments to the population turns into growth in demand for domestically produced goods (import substitution) Ц can be possible only in the event of a radical devaluation of the national currency (many-fold, as in 1998, and not by a few percent only (as it is done now))1.
In this regard, in November 2010 A. Uliukaev stated that, if the policies aimed at boosting social expenditures were to be continued, this could result in the emergence of a structural deficit of the current account that would Section 1.
The Socio-Political Context This brings us to the following general conclusion: last year has clearly demonstrated that Russia is no longer the cheap country that it used to be in the 1990s and early 2000s. This applies to the value of assets, the value of goods, and the value of services. Both the crisis and the relatively stable exchange rate of the ruble maintained in crisis conditions had a considerable impact on the risk/return ratio due to the persistence of high risks and a fall in profitability, because other developing countries have proved to be more reliable than Russia, while offering a comparable level of profitability. As regards the price/quality ratio, Russian domestically produced consumer goods, as a rule, have also been failing to adequately compete with imports. These circumstances have caused capital outflow from Russia, and so put a downward pressure on the current account balance.
ћатериалы этого сайта размещены дл€ ознакомлени€, все права принадлежат их авторам.
≈сли ¬ы не согласны с тем, что ¬аш материал размещЄн на этом сайте, пожалуйста, напишите нам, мы в течении 1-2 рабочих дней удалим его.