Russia s economy managable

May 26, 2009
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, BARVIKHA, May 26 – President Dmitry Medvedev on Tuesday said Russia\’s economic crisis is manageable and should not be exaggerated even as new data showed a rising public deficit and fast shrinking output.

Meeting business leaders at his residence outside Moscow, the Russian president took a cautiously optimistic tone, describing the situation as "moderately negative" and telling officials not to overdo the pessimism.

"There are states where the amount of problems is significantly bigger," the president said.

"When colleagues in the government say we will not come out of the crisis for another 40-50 years, this is unacceptable. If they think so, they should go and work somewhere else. There is a need to rein in tongues.

"Despite the difficult period, nothing dramatic has happened," he added.

Medvedev acknowledged the worsening situation in a budget speech on Monday in which he called for "tough" government savings and said pampered regional authorities should to learn to cope without huge subsidies from Moscow.

On Tuesday, an unnamed government official told Russian news agencies that the budget deficit this year would equal nine percent of Gross Domestic Product (GDP).

This is the first time in years that the budget, long padded with vast earnings from oil and raw material exports, has registered any kind of deficit. The new figure was much worse than an earlier prediction for a 7.4 percent shortfall.

Separately, Deputy Economy Minister Andrei Klepach said GDP shrunk 10.5 percent in April compared to the same month last year — but on the positive side, the rate of shrinkage had slowed.

On a seasonally adjusted basis, GDP declined 0.4 percent in April compared to March when the economy had contracted a much worse 0.8 percent.

Klepach added that the overall prediction remained for a decline in GDP of six to eight percent this year.

Some analysts have warned that the worsening economy and rising unemployment could lead to a rise in instability in the world\’s largest country.

Such pessimism follows years of growth that brought huge popularity for former president Vladimir Putin, who remains powerful in the prime minister\’s post.

Investors remain very wary of Russia amid the global economic crisis and the country has not seen the kind of inflows of capital experienced by other major emerging economies like Brazil and China in recent weeks, analysts say.

As the crisis deepens, Russia\’s government is being forced to revise its budget plans for next year.

This meant Medvedev\’s budget policy speech on Monday was curiously lacking in specifics, commented one Russian newspaper, Kommersant.

"One thing has become clear — the 2010-2012 budget will be prepared not on the basis of an anti-crisis regime but a real crisis regime," Kommersant said.

As the global crisis began to hit Russia, both Medvedev and Putin placed the blame squarely on the United States and its banking crisis.

Officials have since grown more pessimistic about the situation and some even suggested the government could stop publishing monthly unemployment data for fear of what the figures could show.

Last month, Russia\’s jobless rate rose to 10.2 percent from 10 percent in March, reflecting the slowdown across the economy.

The authorities have had to reach deep into Russia\’s reserve funds of accumulated oil wealth to support state spending.

On Monday, Finance Minister Alexei Kudrin said Russia would borrow seven billion dollars next year and 10 billion dollars in the following years in an effort to keep the economy on track.
 

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