Banker Warns of Overheating

The economy is growing too fast and a modest slowdown may be needed to prevent overheating, a senior central banker said Thursday, in a rare sign of dissent from President Vladimir Putin's goal of rapid growth.

The economy, propelled by high consumer demand, grew by 7.4 percent in 2006 and by 8.1 percent in 2007. Government officials expect growth to slow to 6.7 percent this year.

"There are certain symptoms of overheating. ... A certain cooling of the pace of economic growth would not do any harm," first deputy chairman of the Central Bank Alexei Ulyukayev said. "The overheating is a very serious, a fundamental risk," he said.

Ulyukayev said the country saw net private capital outflow of $9 billion in January and capital flows would remain negative until May due to scheduled payments on external corporate debts. He said capital outflows could "naturally" correct high growth rates but that the flows were too volatile to make any predictions for the rest of the year.

The country may allow banks to temporarily hold funds from the federal budget starting in March to boost liquidity, Ulyukayev said, Interfax reported.

The Central Bank and the Finance Ministry will agree on the amount from the budget made available to banks at weekly auctions, which will depend on the level of liquidity in the system, Ulyukayev said, Interfax reported.

Ulyukayev expects banks' daily demand for liquidity to peak in March or April this year at about 400 billion rubles ($16 billion) a day, the agency said. He also said the ruble's real effective exchange rate would strengthen no more than 5 percent against a basket of currencies this year.