Russia's Central Bank Governor Elvira Nabiullina (L) and Andrei Kostin, president and chairman of the Management Board at VTB Bank, attend the 7th annual investment forum "Russia Calling!, Oct. 13. Source: Mikhail Metzel/TASSMikhail Metzel/TASS
The president of Russia’s second-largest lender VTB Bank has stated that Russia is not in fact going through an economic crisis and that there is no evidence of this to be seen in the country.
"Only those who are too young or whose memory is too short think that there is a crisis in Russia. There is nothing in the country that tells us we're going through a crisis," said VTB chief Andrei Kostin during the "Russia's Calling" Forum on Oct. 13.
Oleg Deripaska, one of Russia's richest people and head of the Basic Element Group, did not agree with Kostin's statement. According to Deripaska, "there is a crisis in Russia," and in particular it is seen when "Russian companies are denied access to capital markets."
The forum was notable for the completely polar views on the development of the crisis in Russia expressed by those participating.
Chairwoman of the Russian Central Bank Elvira Nabiullina said that, given the bank's harsh monetary-credit policy, economic growth could resume towards the end of 2016, while a more stable growth will be observed in 2017.
"On the contrary, our harsh policy on the reduction of inflation will help economic growth become stable and healthy," she said. In her words, the Central Bank's objective is "to create conditions for private investors to make thoughtful, well-calculated decisions in predictable conditions."
Andrei Kostin expressed hope that if inflation is low enough, the key interest rate – the main indicator that Russian banks use to lend money – may be reduced to 8.5 percent by mid-2016.
For the first time since the beginning of the year on Sept. 11 the Central Bank left the key rate unchanged: 11 percent annually. The regulator explained that the decision was due to the growth of inflation, the decline of the ruble and the persistence of low oil prices.
In December 2014, due to the fall of the ruble against the dollar and the euro, the key rate was increased from 10 to 17 percent.
"If predictions for the upcoming year are realized, then the key rate in the middle of next year may be around 8.5 percent," said Kostin.
According to Oleg Deripaska, Russia will not have any economic growth until the country returns to the conditions in which businesses were managed in 2007. Meanwhile, Minister of Economic Development Alexei Ulyukayev warned that a "bitter pill" would have to be swallowed to return to any growth.
"All the prescriptions are known. But Russia, just like a sick man who doesn't want to drink bitter medicine, is putting it off," explained Ulyukayev.
Finance Minister Anton Siluanov, meanwhile, argues that in the current situation the government must change its approach to the budget.
"Firstly, this must be done through the reduction of government expenses in the economy," said Siluanov, who believes that the main direction should be the reduction of the budget deficit and restriction on budget expenditure.
“We can speak about the reduction of the key rate, the reduction of inflation, but in the end these are just macroeconomic conditions for obtaining growth," he said, arguing that for stable growth the country needs to stimulate private investment.
Georgy Vaschenko, director of operations on the Russian capital market at Freedom Finance, defines a crisis as "a subjective interpretation by the population of the economy's condition and not a collection of concrete figures.”
“But the decline of industrial production in three quarters straight and an inflation rate of over 12 percent do say that there is a recession in the economy," he said.
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