Right now there are all indications that no plunge in oil prices is on the cards. Slow economic growth is not a recession. Speculations concerning a second wave of the crisis are about a potential recession. But no recession is in view.
interview with Ruslan GRINBERG , Director, Institute of Economics, Russian Academy of Sciences; Associate Member, RAS.
Some analysts claim that Russia seems to be preparing for the second wave of the economic crisis. Regions are being urged to stash as much as 80% of their profits in reserve funds. Top government officials are mentioning, even if cautiously, disturbing signs.
As I see it, no second wave is in the offing, although I know that there are other views as well. Obviously, the world must simply reconcile itself to a prolonged and slow global recovery. This fully applies to Russia as well.
We must proceed from the following. Inasmuch as our prosperity hinges on crude oil prices, they should be taken into account as we forecast Russia’s economic development prospects. Right now there are all indications that no plunge in oil prices is on the cards. But like the rest of the world we are in for economic dullness, stagnation, and a slow and painful recovery. This is how I would estimate the developments in the short term.
Can pessimistic forecasts be a reflection of grave problems in the Eurozone? How can the crisis phenomena in the Eurozone affect Russia’s economic development prospects?
As for the European problems, I believe they have been solved, if for the time being. To my mind, the recent Eurozone summit is the last one. It certainly should have been held earlier, but the fact that they have adopted the vital decisions on writing off the Greek debts, recapitalizing the banks and increasing the financial stability fund was the right thing to do.
Of course, it took time to coordinate the positions of all European countries, which was far from simple. But, as we can see now, this is what eventually happened. I think that the road to stability – at least where the financial markets and the speculators’ appetites are involved – is open. But we must walk along it confidently.
Do you think if the Eurozone regains stability Russia will have nothing to be concerned about?
To my mind, oil price volatility or, more precisely, considerable price fluctuations is the biggest threat. It is another matter that the domestic demand is sluggish. In this area, as I see it, some powerful government investments are needed.
The slow recovery in the West is the consequence of a persistent grave business uncertainty. But this is in the order of things. For more than a decade we had what was in many respects an artificially spurred growth. But it was growth all the same and it helped to improve the living standards across the social spectrum. On the minus side, however, we had a persistent irregularity in development and financial distribution. For now it cannot be ruled out that the same period of time will see slow economic growth, but it will be growth all the same.
I would like to stress that slow economic growth is not a recession. Speculations concerning a second wave of the crisis are about a potential recession. But no recession is in view.