The most important effect on the Russian economy from the European crisis is the tightening of the credit conditions. Since summer last year it is much more difficult for the Russian corporate banking sector to borrow abroad, compared to say 12-18 months ago. As a result many Russian companies and banks have to repay old debts while not being able to borrow new ones.
interview with Sergey Aleksashenko, director of macroeconomic research at the Higher School of Economics - National research university (HSE).
How does the crisis in the Euro zone impact the Russian economy?
The most important effect on the Russian economy from the European crisis is the tightening of the credit conditions. Since summer last year it is much more difficult for the Russian corporate banking sector to borrow abroad, compared to say 12-18 months ago. As a result many Russian companies and banks have to repay old debts while not being able to borrow new ones. This creates pressure on the domestic financial market and forces banks to borrow from the Central bank and led to a certain liquidity crisis in the autumn. All that was a significant factor in creating pressure on the Russian ruble and resulted in its devaluation in September. The Russian economy is highly dependent on external borrowing, and if the situation in Europe gets any worse, if the financial markets are faced with a situation like, for example, there was in the autumn of 2008 with Lehman Brothers when the financial markets came to a stop, that would, of course, be a severe blow for the Russian economy.
Will the Russian economy reach pre-crisis growth rates, as well as other economic positions in 2012, while other countries are still experiencing problems associated with the crisis?
I don't think that any Russian economist or policy maker will say that the Russian economy will demonstrate the same growth rates in 2012 as it did before the crisis, when they were 7-8%. I think the best the Russian government can hope for is to get slightly above 4% growth in 2012, while many Russian experts and, for example, the IMF foresee much slower growth rates of 3-3.5%. That is the most significant difference between Russia before the crisis and Russia after the crisis – the old economic model doesn't work any more, and I think it's wishful thinking to discuss pre-crisis growth rates.
The central theme of Davos 2012 was the transformation of traditional models. Are the solutions to the problems of transformation dependent on the development model put forward by the Asian countries, given the fact that more than 10 sessions of the forum were focused on them?
It seems to me that the main topic of Davos 2012, transformation, is very important because many countries, including the most developed ones, an emerging economies, including Russia and China, are facing up to the fact that old methods of promoting economic policy are not viable any more. You have to remember that the global economy really has become global, and what the government of one country is doing is dependent not only on domestic considerations, any country has to take into account external factors as well, and vice versa. The effectiveness of the decisions taken by the government may be much smaller because of the free flow of goods and services, of financial flows. I'm convinced that the topic of transformation is an area that is at the center of political and intellectual debate in many countries.
But as Leo Tolstoy said in Anna Karenina, all happy families are happy in the same manner while unhappy in individual ways. The same is true for transformation – many countries need to look for transformation but the methods, directions, areas for transformation are different. Russia is facing one set of problems, China another set, the United States, the United Kingdom yet another set, so it is up to politicians and their skills to find the most relevant results of the discussions, the most relevant arguments, the most relevant ideas in Davos and decide how to implement them in Russia. And, of course, once again I have to emphasize that the world economy is strongly interconnected and interdependent. And, of course, a lot will depend on Chinese policy, on Indian policy as well as on Russian policy.
The global economy is slowing down and unemployment is rising. What are your thoughts about the labor market in Russia in the next 5-10 years?
Russia is facing another set of problems on its labor market compared to many other countries. Even during the crisis of 2008-2009, unemployment in Russia was not that high, and if we talk about the medium term, if we look ahead 5, 10, 15 years, the main challenge for the Russian labor market will be the shortage of labor. The demographic situation in Russia is rather tight, and all the experts agree that in the coming five to ten years Russia will face a reduction of the people in the working age as well as a rise in the number of pensioners. So Russia will need to import labor from neighboring countries, and that may turn out to be the most important factor not only for the labor market but for the Russian economy in general. On the other hand Russia will import cheap but low-qualified labor from neighboring countries and that may significantly increase competition in the medium-wage labor market.