Russia
entering 'full-fledged economic crisis', says
ex-minister Kudrin
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[December 22, 2014]
By Darya Korsunskaya
MOSCOW (Reuters) - Russia's government has
pushed the country into an economic crisis by not tackling its financial
problems fast enough, former finance minister Alexei Kudrin said on
Monday, warning the full effects would be felt next year.
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Kudrin -- a darling of investors who is credited with building
Russia's $170 billion worth of sovereign wealth funds -- added that
sanctions over Ukraine, not falling oil prices, were primarily
behind the collapse of the rouble and warned that Russia risked
seeing its debt downgraded to junk status in 2015.
"Today, I can say that we have entered or are entering a real,
full-fledged economic crisis. Next year we will feel it clearly,"
the former minister told a news conference.
"The government has not been quick enough to address the situation
... I am yet to hear ... its clear assessment of the current
situation."
Kudrin, one of few to criticize President Vladimir Putin, quit in
2011 in protest at proposals to increase defense spending.
He has since criticized Putin's response to Western sanctions
imposed following Russia's annexation of Ukraine's Crimea region and
its subsequent support for loyalist fighters. But the two men are
still believed to be close.
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Russia has been hit by what Economy Minister Alexei Ulyukayev called
a "perfect storm" of plummeting oil prices, sanctions and a flight
of investors' capital, made worse by a lack of structural reforms
that means the economy is overwhelmingly dependent on oil revenues.
Government officials have tried to minimize the impact of sanctions
on the country and its rouble currency -- which plunged last week
despite a hike in interest rates to 17 percent. Putin has claimed
"external factors" like oil were the key culprit behind the
country's "tough times".
But on Monday Russia announced plans to impose a heavy tax on grain
exports since rouble volatility and high global prices have caused
exports to spike. Russian news agencies reported Prime Minister
Dmitry Medvedev told a meeting with officials that the country
needed to hang on to its stocks.
And though the country's top oil firm Rosneft said it had made a $7
billion debt repayment from its own cash reserves, easing some
investors' worries. Russia's central bank said it would have to bail
out mid-sized Trust Bank with 30 billion rubles ($544.54 million) to
stop it going bankrupt.
DEFAULTS
Kudrin said falling crude prices only partly accounted for the
plunge in the rouble - which has fallen particularly steeply since
autumn as concerns increased that the sanctions would prevent
Russian companies from meeting debt obligations because they cannot
access Western capital.
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Kudrin forecast a series of defaults among medium and large
enterprises, -- though banks were more likely to be supported by the
state -- which is likely to result in rating agencies downgrading
Russia's debt to "junk" status.
Most agencies have put Russia this year one notch above junk status.
"Russia will get a downgrade," Kudrin said. " It will enter the
'junk' territory."
Kudrin said he believed that between 25 and 35 percent of the
decline in the rouble - down some 45 percent against the dollar so
far this year <RUBUTSTN=MCX> - could be attributed to sanctions. The
rest, he said, was down to a stronger dollar and investors' mistrust
of Russian authorities and their actions.
The rouble ticked up slightly against the dollar on Monday and the
RTS <.IRTS> index of dollar-denominated shares rose more than 4
percent as Brent crude prices <LCOc1> rose 2 percent to above $62
per barrel.
While the currency may stabilize in the first quarter of next year,
its decline will likely help to push inflation to a rate of 12-15
percent in 2015, Kudrin said. The central bank envisages next year's
inflation at around 8 percent.
And even if the price of oil rose to $80 per barrel, gross domestic
product was still likely to fall by more than 2 percent in 2015,
Kudrin said. At $60 per barrel GDP would decline by 4 percent or
more, he added, echoing the central bank's latest assessment,
published last week.
($1 = 55.0925 rubles)
(Reporting by Darya Korsunskaya; Writing by Lidia Kelly; Editing by
Sophie Walker)
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