Economic policy aims under Ulyukayev unchanged, means of achieving them could alter – experts

Alexei Ulyukayev file photo

(Interfax – MOSCOW, June 24, 2013) The appointment of Alexei Ulyukayev as new Russian economic development minister will not alter the fundamental objectives of economic policy, but could alter the tactics by which those aims are achieved, experts told Interfax.

Do jobs change people?

Ulyukayev’s appointment in place of Andrei Belousov will not result in major changes in economic policy, despite their often differing approaches to the tools for stimulating growth, Yevgeny Yasin, Academic Suprvisor of the Higher School of Economics (HSE) and a former Russian economic development minister, told Interfax.

“Have you not noticed that economic policy has not changed with new governments?” Yasin said.

“Passions have been high [when stimulus measures have been discussed] not because people can’t stand each other but because they have been focused on different objectives,” Yasin said, commenting on differing views that Ulyukayev and Belousov have aired when discussing stimulus measures. “There’s no confrontation. Any rational policy is a balance of factors that facilitates economic growth and equilibrium in the economy. So when you hold one position and concentrate on certain things, for example the fight against inflation, and then take up another office, the emphasis might shift to other things,” he said.

Yasin said that in the strategic sense, measures to speed up economic growth “were not for the economics minister to decide.” “What’s needed are institutional changes, but the authorities still haven’t adopted these,” Yasin said.

The ministry’s objectives might be the same but there might be some shift in precedence in the measures to achieve them, said Yevsei Gurvich, head of the Economic Expert Group.

“The economic policy of individual ministries has always been personalized. German Gref prioritized lowering taxes, then other forms of stimulus arose, like development institutions. It would be logical for the ministry’s position to change to some extent now, where the main priority measures for supporting economic growth are concerned,” Gurvich said.

Gurvich said he thought the Economic Development Ministry would be paying closer attention to “healthy economic indicators – inflation, observing the budget rule and so on.” On the other hand, where spending on the economy is concerned, the emphasis will be more on how effective this is than on growth in this spending in absolute terms.

“So we can expect not the objectives themselves to alter but the precedence of the mechanisms to achieve them,” Gurvich said.

In anticipation of reforms

“Alexei Valentinovich [Ulyukayev] has stressed in all his speeches in recent years the need for institutional reforms to stimulate economic growth. This is likely to be his main theme in his new office and I hope he achieves it,” Maxim Oreshkin, chief economist at VTB Capital, said.

He said those reforms include making the labor market more flexible and making a number of markets more competitive.

Yaroslav Lissovolik, head economist at Deutsche Bank in Russia, described Ulyukayev as one of Russia’s main macroeconomic policy specialists.

“I think this could be a positive move from the point of view that the emphasis in stimulating the economy will be more on structural reforms related to higher labor productivity than on monetary and fiscal stimulus, which have paid fewer and fewer dividends in recent years where speeding up economic growth is concerned,” Lissovolik said.

Natalya Orlova, chief economist at Alfa-Bank (RTS: ALFB), said she did not expect any radical changes in economic policy from the new minister. “I think the Economic Development Ministry’s current team is professional enough. I expect greater links between economic and monetary policy. And also more openness in the ministry’s relations with the financial market from the point of view of understanding of financial market players, guidance for investors and the ministry’s objectives,” Orlova said.

Ivan Chakarov, chief economist at Renaissance Capital, said previous ministers Andrei Belousov and Elvira Nabiullina had always been in favor of a more aggressive state policy on support for the economy. “They’ve always said the Central Bank need to lower its rates. There’s always been this conflict – the economics ministry on the one hand and the central bank on the other. So now that Ulyukayev is minister it will be very interesting to see how he will act, because when he was at the central bank he always considered that interest rates did not have to be lowered, that lowering them would not stimulate the economy because inflation would rise, and so on. The most interesting thing is whether his opinion will change on what is the most correct way to support the economy, because essentially he has never thought low rates will help the economy,” Chakarov said.

“I think Putin will need to gather people around them who will help him get the Russian economy out of the situation it is in. Belousov will be an aide, Nabiullina has been appointed head of the central bank. All these people are close to Putin. It’s good that a single center of support for the economy, if you like, is becoming established. This is because there have been differing points of view until now: the Econ Ministry is saying one thing, the Finance Ministry another and the central bank something else. I think there’ll be a more clearly defined line now as to what we need to do to support the economy,” Charakov said.

Alexei Kudrin, a former finance minister who has worked alongside Ulyukayev, said on Twitter that he thought Ulyukayev would be an “effective minister.” “He’s a good specialist with a wealth of practical experience and a profound theoretical grounding,” Kudrin said.

Kudrin told reporters that he thought Ulyukayev would make a better economic development minister than his predecessor Andrei Belousov. “In my view Ulyukayev is more adequate for today’s economy. The previous minister was more dirigiste [an advocate of government intervention in the economy], and Ulyukayev has a better understanding of today’s economy,” Kudrin said.

“Belousov is a perfectly competent man, but he exaggerates somewhat the state’s role, state regulation, state institutions,” he said.