Putin’s Top Bank Nominee Urges Growth Model Rethink

Elvira Nabiullina file photo

(RIA Novosti – MOSCOW, April 3, 2013) ­ Former Economics Minister Elvira Nabiullina, nominated by President Vladimir Putin to head the country’s Central Bank, said on Wednesday Russia needed to rethink its model for growth amid the current global economic uncertainty and mounting problems in the eurozone.

“We need to change our economic growth model and get focused on internal sources of development, primarily investment,” Nabiullina told the Association of Russian Banks’ annual congress in Moscow.

Putin proposed Nabiullina’s candidacy in early March at a meeting with incumbent Central Bank chief Sergei Ignatyev who has served three successive terms and will step down in June. Nabiullina’s candidacy has yet to be approved by Russia’s parliament.

In her first comments on the prospects for the Russian economy since Putin proposed her candidacy for the top bank job, Nabiullina said the slowing growth of lending to the real sector of the economy was a challenge for the country.

“The cost of loans now exceeds the rate of return on projects proposed to enterprises and the banking system must respond to this challenge. It must respond to these challenges in conditions of systemic changes occurring within it,” Nabiullina said in a possibly hint that the regulator may ease monetary policy when she assumes the top banker post.

Nabiullina is seen as a compromise figure in the struggle between the Central Bank’s efforts to conduct tight monetary policy to keep inflation under control and the government’s desire for monetary easing to spur the sluggish Russian economy, VTB bank head Andrei Kostin said when Putin announced his choice for the central banker’s job. The Russian economy demonstrated its weakest growth last year in the entire period of Putin’s reign.

The Central Bank of Russia has kept its key refinancing rate at 8.25 percent since September 2012, saying that rate reflected a balance between inflationary risks and economic growth.

Russia’s Economic Development Ministry predicts economic growth at 3.6 percent in 2013 but may revise down its forecast owing to the country’s sluggish development in the first months of 2013.

Former Finance Minister Alexei Kudrin said on Tuesday Russia’s economic growth in 2013 would remain feeble and Russia would have to fight even for 3 percent growth.