Russian economy not in recession; no urgent need for economic stimulus – Shuvalov

Igor Shuvalov file photo

(Interfax – MOSCOW, April 18, 2013) The Russian government does not have to undertake immediate action to stimulate economic growth, First Deputy Prime Minister Igor Shuvalov said.

There is “dissatisfaction with the pace of economic growth,” he said, but the Russian economy is not in recession.

“This is no place for emotions. Of course there can be stimulation of one another all the time under some kind of complex scenarios, in order not to grow complacent, but in fact there is no recession. What is there? We have an unsatisfactory pace of economic growth taking shape. Of course, for Russia in the current conditions, with high oil prices, having 2%-2.5% growth, given that we reckoned that 5% growth was needed at a minimum to provide for modernization, is probably akin to a recession. It is simply that expectations within the government, the presidential administration are that we in principle must not allow and cannot reconcile ourselves to such an economic growth rate,” Shuvalov said at the Russian Forum organized by Sberbank.

Until now, many experts reckoned that the first quarter was not representative and that the situation will eventually even out.

“The main thing now is not to rush headlong into a discussion of fiscal stimulus measures in order to demonstrate a sharp change in our growth rate,” Shuvalov said. “Should the government do something immediately for that reason? I believe that there should be no immediate reaction, because that would be mistaken and, moreover, very dangerous,” he said.

“At a time when there must be no jerking, when there must be no surrender to a nervous mood, it must be understood that the situation is complex. It is complex not because there is something wrong with Russia, but because it is complex around the world,” Shuvalov said

“The crisis continues. It is developing. How it will develop, and with what waves, no one knows yet, but no one is saying that the crisis is over and the Russian economy will start to do just fine,” he said.

The government has no plans to change the budget rule that sets the minimum size of the reserve fund at 7% of GDP.

“Combating inflation remains on the agenda. We understand that inflation at the beginning of the year developed differently than we had wanted,” he said.

“As previously, inflation remains a government priority. Suddenly making an issue of a need to increase in inflation for the sake of growth: we do not support such a discussion and are categorically opposed to it,” he said.