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. Last Updated: 07/27/2016

Yasin Warns of 'Depression' at Davos

DAVOS, Switzerland -- Russia's Economics Minister Yevgeny Yasin warned Friday the country could be in for an "extended depression" unless a three-year package of government spending cuts was successful.


Yasin, one of the key economic figures around President Boris Yeltsin since the collapse of the Soviet Union in 1991, also suggested communists could make a comeback unless there was a turnaround before the end of the century.


"If we manage to implement our new reform program, we could achieve a growth rate of 5 to 6 percent by the year 2000," he told a session on the Russian economy and the outlook for business at the Davos World Economic Forum.


"But if we fail, we will be faced with the prospect of an extended depression," he added.


Yasin was taking part in the session with other key Russian officials -- Boris Berezovsky, deputy head of the Security Council, Alexander Shokhin, first deputy chairman of parliament, and Dmitry Vasilyev, who heads the Federal Commission for the Securities Market.


All three said key issues had to be resolved before a solid market economy attracting substantial foreign investment was in place, but like Prime Minister Viktor Chernomyrdin, who spoke at the forum Thursday, they appeared more upbeat.


Chernomyrdin said he was sure foreign investment, which totalled only $2 billion in 1995 and $6 billion last year, would increase to $20 billion by the end of the century.


But the 61-year-old Yasin, former economics professor and mentor of many reformers, appeared more bearish.


He admitted earlier this month that last year the government had sacrificed fiscal reform to ensure that Yeltsin won re-election against a strong communist challenge.


On Friday, he told world business and political leaders at the annual Davos gathering that overall significant progress had been made in reform, especially in the fight against inflation.


But amid a general structural crisis, with output still declining in 1996 for the fifth year in a row and industry still starved of cash, he said, there was still widespread discontent with both reform and reformers.


The strong popular vote for Communist Party candidate Gennady Zyuganov in the presidential elections in June and July "cannot be ignored," he declared. "It must make us think what might come further down the road." Under Yasin's measures, government spending, which he said was around 40 percent of gross domestic product, had to be cut back to 25 to 30 percent, "which is more realistic for a country that is struggling to get out of recession," Yasin said.


The package includes a program of cuts in subsidies to housing -- rents are still more or less at the level of the Soviet era, when tenants paid only around 5 percent of their incomes -- to communal projects and to transport.


In his speech Thursday, Chernom-yrdin proposed setting up free-trade zones with an emphasis on Pacific Rim areas and joining the Asia-Pacific Economic Cooperation forum that already includes the United States and China.


Referring to high technology investment, Chernomyrdin said, "We would like to set up areas of free trade in various regions of the world, stressing Asian and Pacific rim areas [which are] taking up ever greater weight in the world economy."


Joining the World Trade Organization "would be most important, but we realize that to play our role in that organization, we will need to change a great deal in our economy," he said, pinpointing new investment, financial, tax and trade measures.