Russia's economy is past the worst of its steep downturn but the crisis is not over yet and risks to any recovery still remain, the government's anti-crisis tsar told parliament on Wednesday. "We think that the acute, shock phase of the crisis is indeed over. We are sure about that," First Deputy Prime Minister Igor Shuvalov said in a report on the government's anti-crisis efforts to the lower house of parliament.
"Some say the crisis has finished... We at the government do not agree with this," said Shuvalov. "Some worsening of the situation is possible, we do not rule that out. On the whole we are leaving this phase and entering a recovery period." Russia's economy shrank by a tenth in the first half of 2009, but recent data shows tentative growth resumed in the summer months as trillions of roubles of state anti-crisis money filtered through into the economy, the global situation improved and prices for its oil exports picked up.
Shuvalov, who has been tasked by Prime Minister Vladimir Putin with overseeing anti-crisis efforts, forecast that the economy will return to pre-crisis levels in 2012. He said that Russian gross domestic product (GDP) would shrink by "a bit more than 8 percent" this year, though there was a chance of a smaller slowdown. The official government forecast is for a decline in GDP by 8.5 percent, which - after a decade of spectacular growth - would be Russia's steepest annual downturn in economic activity since the mid-1990s.
Finance Minister Alexei Kudrin forecast that the economy will grow 1.5 percent in the current quarter and 2.4 percent in the final three months of the year, quarter-on-quarter. "We call it an exit from recession, but we cannot say it is an exit from the crisis," he told reporters after the Duma session. "There are problems in the financial sector, low profits, low investments, low incomes for the population."
Putin, whose popularity ratings remain high despite the crisis, did not attend the session. His spokesman said he would address parliament at a later date. Risks for the economy include unemployment, inflation and falling demand in some sectors, said Shuvalov. Bad loans are still rising and banks remain reluctant to lend despite the government's urging, he said.
"The credit activity of Russian banks remains low," central bank Chairman Sergei Ignatyev told the Duma. "According to preliminary estimates, the volume of the loan portfolio to non-financial organisations and the population has barely changed in the first 8 months of the year," he said.
But other officials said the situation was improving, with Kudrin noting state-controlled Sberbank, Russia's biggest bank, had stepped up lending in the past month. "We expect to see banks' loan portfolio growing this autumn, maybe not dramatically. Banks have started lending to the real economy with state guarantees for loans as one of the reasons," Shuvalov said.
The government allocated 300 billion roubles ($9.68 billion) in the 2009 budget to guarantee banking loans in order to kick-start lending and get the economy out of recession. Shuvalov said Russia should launch a new privatisation programme as it moves towards recovery and that the state did not intend to become a long-term shareholder in companies which were used as collateral for state loans.
He said that if companies failed to pay back emergency loans to state bank VEB, then their stakes would be put up for sale on the open market. "The state is a bad manager. We do not have the necessary resources required to run such a number of bad companies," he said. "We have come to a phase when there is a need to launch a new structural privatisation programme."
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