The Russia office of the International Monetary Fund believes the Russian economy cannot grow faster than at 4% a year. Russian Prime Minister Dmitry Medvedev disagrees, arguing at the Krasnoyarsk Economic Forum last week that new technology and new management methods should enable the country to return to the pre-crisis expansion rate of 5.5% by 2018.
Head of IMF’s Russia office Odd Per Brekk also said this week that Russia must rein in inflation by means of spending cuts or face an even worse international perception of its investment environment. The advice immediately won supporters in Russia, including chief analyst for Nomos Bank Kirill Tremasov:
"True, the pre-crisis expansion model based on soaring oil prices no longer works. Cash stimulation alone is powerless to reignite growth. The government should continue its policy of restricting the squander of oil revenue, and the Central Bank, its efforts to squeeze the money supply. Improvement is only possible through structural adjustment that creates a better business climate in Russia. The IMF’s latest advice is absolutely realistic and useful”.
Capital markets analyst at the Institute of Global Economy and International Relations of the Russian Academy of Sciences Professor Yakov Mirkin disagrees, arguing that a monetary squeeze can kill modernization. He also calls attention to the fact that Russia’s money mass amounts to just 50% of the annual GDP. This is much less than in other developing or emerging economies. Professor Mirkin believes a carefully managed increase of the money in circulation would work as a useful expansion and development instrument.
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