Ministry of Finance of the Russian Federation
Ministry of Finance of the Russian Federation
16.04.2011

Statements of Deputy Head of the Government of the Russian Federation – Finance Minister of the Russian Federation A. Kudrin to press agencies at 2011 World Bank -IMF Spring meetings

 

Global economy has not yet recovered from crisis - Kudrin

WASHINGTON. April 16 (Interfax) - The global economy is undergoing a difficult period of overcoming the crisis, and risks in the international financial sector have grown of late, said Russian Deputy Prime Minister and Finance Minister Alexei Kudrin.

"We see that the risks have even grown in the financial sector," Kudrin told journalists following a G20 session when asked whether he agrees with International Monetary Fund Managing Director Dominique Strauss-Kahn's remark that it is too early to say that the global economic crisis has been overcome.

For instance, there are risks at the level of sovereign debts, which could complicate the condition of financial institutions that have bought these debts, Kudrin said. He cited a number of European countries as an example, i.e. Ireland, Greece, and Portugal, which "had support from the European Union and the leading funds and were above suspicion, but it's turned out that the quality of their debt is much worse than Russia's," he said.

"Russia looks better than some countries that earlier looked stronger in terms of all indexes. This means that problems have accumulated on this market," he said.

The problem of bad assets that many banks have on their balance sheets has still not been solved, either, Kudrin said. "In other words, not all sectors have recovered yet. Difficulties with revenues remain in place in a number of industries, and banks are anticipating problems with the repayment of some debts," he said.

From time to time, some banks in a number of countries need support from the government, Kudrin said. "These are mines, they are present, and we are all crossing a minefield. And we don't know yet what financial institutions will turn out to be weak and won't be able to endure this marathon of overcoming the crisis," he said.

Apart from the debt and financial risks, others are also in place, among them the high oil price, which could slow down economic growth, Kudrin said. "A number of countries have already revised them [the growth rates] downward amid the high oil prices," Kudrin said.

Some countries also have too large sovereign debts and budget deficits, he said.

"The schedules for reducing the deficits are not being followed," Kudrin said. For instance, the U.S., where the budget was adopted only at the end of the fiscal year, is seeing heated debates on reducing the deficit now, he said. "The U.S. adopted the budget at the very end of the fiscal year, that is, the country was living without a budget at all. One of the leading civilized countries lived by provisional decisions," Kudrin said, adding that Russia has not seen such a situation for quite a long time.

The U.S. will have to make quite sensitive decisions on the size of its government debt in the near future, Kudrin said. "Since this also involves election motives, this will be quite a tough task for the U.S.," he said.

Problems are also present in the "overheated" Chinese economy, which earlier served as the locomotive of global economic growth, Kudrin said. "Growth will be high again this year, which means that the overheating has not been defeated," Kudrin said.

At the same time, economic growth in China could slow down, as the Chinese authorities have set the goal of maintaining 8% growth in coming years, Kudrin said. "This means that the demand for leading global commodities, including oil, will not be maintained at the current level," he said.

"We also know other problems related to political events, to Japan, and they are aggravating these difficulties. Problems are overlapping. Therefore, the overcoming of the crisis is quite difficult," he said.

There is also a danger of high inflation due to very low refinancing rates established by leading world banks, which prompts excess of liquidity on global markets, Kudrin said. "Inflation could reach from 4% to 5%, which is much enough," he said.

Asked what price for oil could endanger economic growth, Kudrin said, "Higher than $110. We are now in a slowdown phase of the global economy."

The oil price higher than $90 per barrel could stay for up to a year and a half, Kudrin said. "We still expect it to start going down next year," he said.

Kudrin recalled that he had presumed a year before that the price for the Urals oil blend would go down to $60 per barrel within the next three years and would stay at this level for about half a year. He said he is not going to revise this forecast so far. "Two years are ahead.  When excessive liquidity leaves the market, [the oil price] will compress inevitably," he said.

 

Russia could have balanced 2012 budget at $120 oil -Kudrin  

WASHINGTON. April 18 (Interfax) - Russia could have a balanced budget in 2012 if Urals crude averages at $120 a barrel, Deputy Prime Minister Alexei Kudrin, who is also the country's finance minister, told reporters in Washington.

"There'll be a zero deficit next year of oil trades at $120, taking into account the decisions we have reached on defense spending, insurance contributions. This is my estimate for now. Work on the budget is not yet over," Kudrin said.

The oil-price forecast for next year is lower than for this, Kudrin said. The Economic Development Ministry's most recent projection for this year is oil at $105 per barrel and at $93 next year.

If oil averages $115/barrel over the year, Russia could wind up with a balanced budget in 2011, Kudrin said. Factoring in additional spending to balance the budget this year, a slightly higher price might be a requisite, Kudrin said. For now, based on $105/barrel, the Finance Ministry projects a Russian budget deficit of 1%-1.4% of GDP.

The Russian government plans to achieve a balanced budget in 2015 with oil at $90/barrel.

That might be achievable earlier if oil is at $120/barrel, Kudrin said, but the Finance Ministry is not putting all its chips on it. "And there is no real need either," he said. "We want over three years - that is, 2012, 2013, and 2014, these are budget-consolidation years - to reach a balanced budget by 2015. The target I am setting is $90. That has nowhere been adopted as a decision nor made firm," he said.

Previously, the goal was achieving a balanced budget by 2015 with oil at $70/barrel, Kudrin said. However, decisions the government has made to increase budget spending "are very expensive, and so I am easing the bar back," Kudrin said.

"It is very low, this bar, but we have to get over it. I think it is right for our economy, that is, balance at a high [oil] price I consider incorrect and dangerous for the economy, which is why I think that the price of oil will in the medium and long-term perspective be under $100 per barrel," Kudrin said.

After the parliamentary and presidential elections, Kudrin said, additional budget-balancing measures will have to be taken that allow it to be balanced with oil at $90/barrel. "But these measures have not even been designed, they have not been adopted, and so there are always difficulties along this path," he said.

 

Kudrin plans to pull out of VTB Bank, Alrosa

WASHINGTON. April 16 (Interfax) - Russian Deputy Prime Minister and Finance Minister Alexei Kudrin plans to step down as the chairman of the VTB Bank's supervisory council and the diamond giant Alrosa's supervisory board next week.

"I will pull out of VTB and Alrosa next week, right after I return. I will come home and submit my resignation," Kudrin told journalists.

It was reported earlier that President Dmitry Medvedev put forward ten initiatives on improving the investment climate in Russia at a session of the government commission on modernization in Magnitogorsk on March 31.

In particular, to eliminate excessive influence of state-owned companies on the investment climate, Medvedev ordered endorsing a schedule of privatization of large stakes owned by the state for 2011-2013.

In addition, members of the presidential secretariat and government ministers and deputy prime ministers in charge of regulating various economic sectors will have to withdraw from boards of directors or supervisory boards of companies operating in these sectors.

A number of high-ranking officials, including Kudrin, First Deputy Prime Minister Viktor Zubkov, and Deputy Prime Minister Igor Sechin, must leave their offices in state corporations by the end of the first half of 2011.

Kudrin chairs the VTB Bank supervisory council and the Alrosa supervisory board.

 

Tax burden on homeowners to grow in Russia - Kudrin

WASHINGTON. April 15 (Interfax) - The tax burden on homeowners will inevitably grow in Russia, Deputy Prime Minister and Finance Minister Alexei Kudrin at the Russian Forum held at the Peterson Institute for International Economics in Washington.

"The tax burden on homeowners will grow - this is an evolutionary process, but it is inevitable," Kudrin said."

Kudrin said Russia faced several problems, including demographic ones and sustaining its defense capability, and that the budget would have to be balanced.

"I'm not yet prepared to give a full answer [as what taxes might be raised in order to balance the budget]," Kudrin said. He said this issue would have to be resolved in the next two or three years.

 

Russia, Belarus may complete loan talks in a month's time - Kudrin

WASHINGTON. April 18 (Interfax) - Talks on the terms of Russian loans to Belarus may be completed in a month's time, Russian Deputy Prime Minister and Finance Minister Alexei Kudrin believes.

"It's hard to tell. I would want us to complete them in a month's time but that depends on the nature [of talks], whether there will be difficulties with issues that we are thrashing out," he said to journalists who asked him when talks may come to an end.

"Last Monday I met the finance minister of Belarus. We exchanged information, answered each other's questions. I have an idea of what is ready today and how the Belarusian side sees it," Kudrin said.

He said the sides made a list of issues on which additional work is required. "Such work is under way every day," he said.