#6150
[Second Issue of the Day]
#9
Komsomolskaya Pravda
March 22, 2002
IS THE RUBLE FACING THE THREAT OF ANOTHER DEFAULT?
Forecasts from some leading economic analysts
Author: not indicated
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
INFLATION SOARED IN JANUARY. IN FEBRUARY, FOR THE FIRST TIME IN RECENT MONTHS, THERE WAS A FAILURE TO MEET TAX REVENUE TARGETS. ANDREI ILLARIONOV, THE PRESIDENT'S ECONOMIC ADVISOR, BLAMES AN OVERLY-STRONG RUBLE. MANY EXPECT THE RUBLE TO FALL AND CONSUMER PRICES TO RISE IN THE REMAINDER OF 2002.
Inflation soared in January. In February, for the first time in recent months, there was a failure to meet tax revenue targets. Andrei Illarionov, the president's economic advisor, blames an overly-strong ruble. What's more, Viktor Gerashchenko, who has steered the ruble exchange rate for the past eight years, has just resigned as head of the Central Bank. Could this be a signal for another devaluation of the ruble?
Questions for the experts:
1. Will the government carry out another devaluation of the ruble?
2. What will the exchange rate be by the end of 2002?
3. What will this year's inflation rate be?
4. Which goods and services will show the greatest price rises?
Yevgeniy Yasin, research advisor at the Higher School of Economics and former Economics Minister:
1. There will be no drastic collapse of the ruble, as in 1998. Recently the ruble has been gradually weakening, at less than the rate of inflation. In my view, this kind of government policy is correct, for the present.
As for Viktor Gerashchenko's resignation from the Central Bank, the following factors should be taken into consideration. The ruble is a mirror, reflecting the economic situation. Under no circumstances should it be the subject of state policy or depend on anyone's resignation.
2. As we can see already, the budget figure - an average exchange rate of 31.50 rubles to the dollar - will be exceeded before December. Most likely, the rate will be 32-33 rubles to the dollar by the end of 2002.
3. Inflation will be somewhat higher than the government assumed. In my evaluation, the average growth of consumer prices will be 16% over the course of the year.
4. The products and services of the natural monopolies - electricity, gas, transport - will probably become more expensive. However, the government is reining in the appetites of the monopolists.
Mikhail Zadornov, deputy chairman of the Duma Budget Committee, former Finance Minister:
1. Any rumors that the ruble might soon be devalued become urgent only if the prices for Russia's oil fall lower than $15 a barrel. The situation on the oil market is normal thus far; so it makes no sense to speak of a ruble devaluation.
2. At the moment there are grounds to assume that Russian oil will be at $18.50 a barrel, and the exchange rate will be about 31.50 rubles to the dollar, by July 1. Subsequent events depend on oil prices and the state of Russia's budget.
3. In my opinion, the most realistic inflation forecast is 16%, at least.
4. It is obvious that housing and utilities will record the greatest rise, because the regions are facing a dilemma now: either to cut off subsidies for housing and utilities, or not to pay wages to state-sector employees. Most likely, they will choose the first option.
Andrei Belousov, head of Center for Macroeconomic Analysis and Short-Term Forecasting:
1. I think the government's plans do not include a ruble devaluation, since this would ruin the macroeconomic policy the government has carried out over the past two years, and would do much more harm than good.
Exports of raw materials are unlikely to grow: global oil and metal markets are already saturated. However, real incomes will inevitably fall. Consumers will buy less, and this factor will become a new obstacle to growth in domestic industry.
Moreover, there are no real reasons now for a devaluation of the ruble. Despite declining oil prices, Russia's monthly exports are around $2-3 billion higher than imports. That amount of hard currency revenue is enough to keep the ruble from falling for at least a year.
2. The most likely exchange rate is 33-34 rubles to the dollar. If capital flight from Russia increases, as it did in the fourth quarter of 2001, the exchange rate may reach 35 rubles to the dollar.
3. Inflation may fit the framework of the forecast: 12-14% over the course of this year. Factors for you to judge: last year inflation was 7.1% in the first quarter, while this year it is expected to be 5- 5.5%. If the government continues with its current fiscal policy, and the regions do not force up rates for housing and utilities, developments will most likely be as follows: in the second quarter the average growth in prices will be 2.5-3%, and 1% in the third quarter, and around 3-4% in the fourth quarter.
4. In this respect, the chargeable services will undoubtedly take the lead: their increase may amount to 25-30%. By the way, everything - housing rent, transport fares, health care and education will become more expensive.
(Translated by Andrei Ryabochkin)
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