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!Mikhail Metzel/TASS
Andrei Kostin, president of Russia’s VTB Bank, has said Russia is not going through any economic crisis and there is no evidence of this 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 Kostin, head of Russia’s second largest lender bank 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.
"There is a crisis in Russia," said Deripaska, and it is seen when "Russian companies are denied access to capital markets."
The forum saw completely differing views being articulated on the development of the crisis in Russia.
Hope for growth
Elvira Nabiullina, Chairperson of the Russian Central Bank said, 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. The Central Bank's objective is "to create conditions for private investors to make thoughtful, well-calculated decisions in predictable conditions."
Kostin expressed hope that if inflation was 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 2015, the Central Bank left the key rate unchanged on 11 September, at 11 percent per annum. The regulator said the decision was because of three reasons; the growth in 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 raised 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 Deripaska, Russia will not have any economic growth until the country returns to 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 before a 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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