Kudrin Sees '09 Growth Dropping Below 5.5%

ReutersKudrin attending an annual financial conference in Washington this weekend.
WASHINGTON — Finance Minister Alexei Kudrin said the IMF's growth outlook for the Russian economy next year was too optimistic and called on the fund to move quickly to help emerging markets.

The International Monetary Fund said earlier this month that growth would slow to 5.5 percent in 2009 from a projected 7 percent this year.

But Kudrin called the forecast too rosy, adding: "On growth, the next two months will show the real picture."

Speaking at the Institute of International Finance's annual meeting Sunday, Kudrin said that given the "unprecedented" scale of the global credit crunch, the IMF should be more aggressive in using its money.

Developing economies in particular need assistance, he said.

"We need to use the IMF's reserves to support countries that do not have large forex reserves like Russia has. We will be able to handle our problems, but some of our neighbors face similar problems and lack resources," Kudrin told reporters.

Kudrin, who criticized the IMF for a slow response to the 1998 financial crisis, said the fund should stand ready to act quickly and with simple mechanisms.

The finance minister also said he was confident that Russia's small and medium-sized banks would not see a wave of mass bankruptcies, Interfax reported. "There's something of a myth that medium-sized and smaller banks aren't sturdy," he said, adding that in the 1998 crash, the biggest banks crashed while smaller ones survived.

The bailouts of KIT Finance and Svyaz Bank were needed to prevent broader nervousness in the financial sector, Kudrin said, the news service reported. The crisis will force states to take a larger interest in the banking sector, he said. "We're considering buying bad assets and increasing our direct involvement in banks, if necessary."

Both the Group of Seven leading industrial nations and the larger G20, which includes Russia, China, India and other emerging economies, vowed this weekend in Washington to take action to stem the financial crisis, but they did not announce detailed plans.

During the weekend meetings, Kudrin took part in discussions about the crisis at a dinner with financial officials from the G7 — the United States, Britain, Canada, France, Germany, Italy and Japan — despite earlier calls to exclude Russia from such meetings as a punishment for the war in Georgia in August.

Kudrin said "discussions over our policy, including the events in Georgia," did not affect his agenda in Washington, where financial leaders had sought to show unity in the face of the crisis.

In a clear bid to demonstrate how it can contribute to efforts to stem the panic, Russia is set to hold bilateral loan negotiations this week with tiny Iceland, whose economy is teetering on the brink of collapse.

Russia, which has written off $35 billion of debt to poor countries in the last five years, is ready to give Iceland a helping hand, Kudrin said, but its generosity has its limits.

"There should not be a free lunch," Kudrin said when asked whether reserve holders have an obligation to help to countries hit by the crisis.

Reuters, MT