Kudrin Boasts of Growth on IMF Visit

BloombergWorld Bank president Robert Zoellick and IMF managing director Dominiqe Strauss-Khan in Washington on Friday.
NEW YORK -- Finance Minister Alexei Kudrin said Friday that the economy would expand faster than initially forecast this year, even as growth in the U.S. slows in the next two quarters.

The economy probably will grow 7.1 percent this year, compared with an earlier forecast of 6.5 percent, helped by high prices for oil, Kudrin told reporters in Washington, where he was attending meetings of the International Monetary Fund and the World Bank.

Finance chiefs from the Group of Seven industrialized nations, also meeting in Washington, have said the global economic slowdown may worsen amid an "entrenched" credit squeeze and signaled concern over the dollar's slide. The U.S. currency reached a record low of $1.59 against the euro last week.

"The expectations are for this crisis to be significantly worse than the one in 1998," said Kudrin, who did not participate in the G7 discussions. Instead, he met U.S. Federal Reserve head Ben Bernanke.

A possible decline in oil price is a "very significant risk" for Russia, Kudrin said. "The price of $100 a barrel is unstable, speculative, and won't hold on for too long."

Urals crude oil, the country's major export blend, has surged more than 10-fold since 1998 to $104.72 per barrel Friday. The price may plunge, Kudrin said. It has been driven by a weaker dollar and demand for oil as a hedge against inflation, he said.

Russia wants to diversify its exports by joining the World Trade Organization and getting wider access to foreign markets. Most of the 152 member-countries of the trade arbiter have approved Russia's bid to join. The United Arab Emirates is expected to give its approval in a week, Kudrin said.

"America's economy is still in pretty good shape, even though the finance system is in crisis and that strengthens the possibility of a recession," Kudrin said. "A decline in gross domestic product in the next two quarters may be expected."

The expected decline in U.S. growth is "a necessary correction," Kudrin added. "The markets have a possibility to recover within the next year or possibly two or three years."

Central banks in the United States and Europe need to "coordinate actions" to minimize the fallout of the credit crisis worldwide, Kudrin said. "I hope this is what is happening now."

The Russian government will allow its banks to bid for budget funds from next week to shore up lenders' liquidity, Kudrin said.

He declined to comment on how much money will be available to the banks.

n Kudrin said Sunday that the country would not impose extra restrictions on grain exports, even as consumer prices rise. "We expect a very good grain harvest this year," Kudrin said in Washington, where he is leading Russia's delegation at semi-annual meetings of the IMF and World Bank.

He also said the country planned to reduce its borrowing from the World Bank by half and finance some of the projects designed by the bank with proceeds from the country's oil sales.

"We don't need those loans, because we have our own resources," Kudrin said. "It's most likely that we will revise planned borrowings from the bank and cut loans by more than half."