KONIBAJE NEWS &FEATURES : Russian minister warns of recession threat

Worries about Russia’s growth outlook intensified on Friday when the country’s economy minister gave warning that a broad slowdown risks turning into a recession later this year without efforts to stimulate production.
The comments by Andrei Belousov appeared to buttress the case made by a number of Russian officials recently for a looser monetary policy that favours bolstering growth over fighting inflation.


“We are not in recession for now, but we may get there – there is such a risk,” Mr Belousov told reporters during a trip to eastern Siberia. “I think that, if by autumn we don’t see growth for some period, we may slide into recession.”
The announcement comes a day after his ministry slashed its projection for economic growth in 2013 by a third, from 3.6 per cent to 2.4 per cent. Growth in the first quarter was likely to have reached about 1 per cent, compared with a year ago, which would mark the fifth-consecutive quarter of slower growth.
“We will propose economic stimulus measures. We will have a meeting with the president,” said Mr Belousov. “Measures should be taken, as we need to solve the situation . . . in order not to slide into recession.”
The slower first-quarter growth was mainly the result of a combination of low industrial production, consumer spending, and investment, said economy ministry officials.
However, one economist pointed out that year-on-year comparisons can be misleading, particularly because the central bank sought to burst a consumer credit bubble in September that was artificially inflating consumption by raising its benchmark refinancing rate from 8 per cent to 8.25 per cent.
Farhan Kazmi, head of equities at Credit Suisse in Moscow, said the bearishness was overblown. “We’re more optimistic,” he said, predicting a strong harvest, and added that recent radical easing moves by the Bank of Japan will keep commodity prices high.
However, the signs of sputtering growth have put pressure on Russia’s central bank to loosen monetary policy once again and target growth instead of inflation. Dmitry Medvedev, prime minister, in January set a target for 5 per cent growth, more than double the revised estimate.
Elvira Nabiullina, former economy minister and adviser to President Vladimir Putin, is set to take over as central bank governor in June, and is thought to be more dovish on inflation than her predecessor Sergei Ignatiev, who is coming to the end of his second term.