Russian economy may recover from crisis in 3–4 years

The Russian economy could require three or four years to recover from the severe contraction that it had this year, European Bank for Reconstruction and Development (EBRD) President Thomas Mirow said.

The recovery of the Russian economy “will very much depend on the evolution of the world economy because the world economy will drive the demand for Russia’s natural resources.
And, of course, the shrinking of the Russian economy this year has been very severe, so it will certainly take 3 or 4 years to recover from this,” Mirow said.

Russian Deputy Prime Minister and Finance Minister Alexei Kudrin said in September that the recovery stage of the Russian economy would be completed by the end of 2012.

When asked about inflation in Russia and whether it could become an obstacle to the recovery from the crisis, Mirow said that inflation targeting was very important for Russia. “Of course, the most important element in this is to increase the competitiveness of the Russian corporate sector so that there can be a rise in productivity.
This is the most important element to reduce the inherent inflationary tendencies that we have seen in the Russian economy up to now,” he said.

Consumer price inflation in Russia amounted to 8.1% from January 1 through November 2, according to latest data from Russia’s Federal State Statistics Service.
Russia’s Economic Development Ministry currently expects inflation to be marginally over 8% in 2009. The Central Bank of Russia projects inflation to be below 10% in 2009. Last year, inflation in Russia was at 13.3%.

Speaking about the EBRD’s activities, Mirow said that the bank was requesting more capital from the governments that own the bank in order to further increase its activities, including in Russia.
A final decision on a capital increase is expected to be made in May 2010 at the EBRD’s annual meeting in Zagreb, he added.

“We hope for the best, but we are of course aware that other financial institutions also have similar requests,” Mirow said.

Mirow also pledged comprehensive programs to sustain the early recovery stage, in which the global economy will probably enter in 2010.
The EBRD intends to address the risks of the early recovery stage by further stabilizing banks and providing loans to small- and medium-sized companies in the bank’s countries of operation, he said.