The only way for Russia to protect itself from the negative consequences of the super-soft monetary policy of developed countries is to urgently reorient the economy from raw materials to manufacturing. This is how the experts interviewed by Izvestia commented on the general forecast of the heads of the Ministry of Finance, the Ministry of Economic Development and the Central Bank, expressed at the Gaidar Forum. The representatives of the departments talked about the probable “import of problems” into Russia from Western countries due to their irresponsible use of the printing press. Experts, however, note that the economic authorities of the Russian Federation should not focus on looking for those to blame for the upcoming internal difficulties.
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Talking about other people’s problems
The central session of the Gaidar Forum was a discussion of the heads of the Ministry of Finance, the Ministry of Economic Development and the Central Bank. Anton Siluanov, Maxim Reshetnikov and Elvira Nabiullina discussed the prerequisites and drivers of economic growth in the post-pandemic period.
What to choose: to pursue a super-soft monetary policy in a crisis or to limit the pace of the printing press, regardless of the problems of the economy? This dilemma became a key point of discussion.
The heads of financial and economic departments expressed a generally unanimous point of view that Western countries, which flooded their economies with money last year and continued this policy in 2021, are behaving irresponsibly.
– It seems that no matter how much money you pour into the economy, no matter how you pursue a soft monetary policy, inflation does not grow, no matter how much you build up debt, it is serviced. And now everyone, in my opinion, lives in this illusion, – said Elvira Nabiullina.
However, according to her, it is almost impossible to get out of such a model – fiscal dominance arises, bubbles inevitably inflate, which no one has yet learned to blow off painlessly.
A similar point of view was expressed by the Minister of Finance.
“The past year has shown that many countries were light on non-traditional instruments. They increased debts, budget deficits and it will be extremely difficult for them to get out of this situation, – said Anton Siluanov.
In his opinion, the excessive volume of public investments harms the economy rather than benefits.
Maksim Reshetnikov did not object to this position either, although he noted that in the coming years it would have to be carried out in conditions of budgetary consolidation. Therefore, it is necessary to focus on stimulating private investment, the head of the Ministry of Economics believes.
He added that soft monetary policy in developed countries is likely to lead and has already led to a surge in inflation for a number of goods. For example, for grain, the cost of which has grown up to 30% on the world market. Russia has already reacted to this situation and increased the customs duty on wheat exports within the quota to € 50 per ton, said Maxim Reshetnikov.
Despite a balanced policy, Russia will have to respond to the problems that will generate liquidity flows that have appeared in the markets as a result of unprecedented quantitative easing in developed countries, the heads of Russian economic departments noted.
– Now, as the economy recovers, we will see, as I see it, acceleration of prices and acceleration of global inflation. It will be such a big challenge for all of us, for which we are now preparing, – said Maxim Reshetnikov.
During the pandemic, the US authorities adopted three packages of measures to support the economy with a total cost of more than $ 3 trillion and lowered the base rate to almost zero. The ECB expanded the asset repurchase program to 1.35 trillion euros, while the base interest rate on loans remained at zero, and on deposits – at -0.5%.
Protect the economy
Russia is heavily dependent on both exports and imports – it exports mainly raw materials, and imports consumer goods, equipment and components, said Andrei Tochin, director of the Center for Expertise and Promotion of Foreign Economic Initiatives. High overseas inflation is squeezing demand. Consequently, the goods that we supply will be required less, and the prices of imported products, on the contrary, will rise.Such events will have a negative impact on the ruble exchange rate and on the domestic market, the expert noted. In his opinion, the only way to neutralize the negative effects is to develop the country’s economy and reorient towards manufacturing.
Much of what the participants in the discussion of the Gaidar Forum pointed out is quite fair, noted Oleg Buklemishev, director of the Center for Economic Policy Research at Moscow State University. However, it should be understood that the Western authorities were forced to take such measures by the exceptional circumstances of 2020. Now there is a broad scientific discussion about the advisability of such a policy, and many scientists defend them as risky, but allowing to overcome the pandemic crisis.
Time will tell who will be right in his approach to quantitative easing – Russia or the West. However, so far the trajectory of sustainable growth is not visible, said Alexey Vedev, director of the Center for Structural Research at RANEPA. This is a consequence of the fact that the authorities are pursuing a conservative budgetary policy. It is extremely difficult to call this year’s budget a development budget, the expert noted.
It is unlikely that Russia will succeed in isolating itself from the influence of the super-soft economic policies of other countries, Alexei Vedev stated. To do this, the country must either completely close itself off from the outside world, like North Korea, or ensure economic growth several times higher than world indicators. Both of these options are impossible today, the expert concluded.
While the national goal of achieving economic growth rates above the world does not look realistic, agreed the head of the “Fiscal Policy” direction of the Economic Expert Group Alexander Suslin. Russia needs a specific program to accelerate GDP and reforms that would help restart the economy, the expert said.