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bne September 2019 Eastern Europe I 59
Russia's government and CBR argue over paths to reignite growth
IntelliNews Pro
"Ithought the CBR (Central Bank of Russia) is better in
macroeconomics than that", the Minister of Economic Development Maxim Oreshkin wrote on his Facebook, commenting on the CBR's report which claims that without consumer crediting Russia would see zero GDP growth in the disappointing first quarter.
A debate has broken out in the government over how to boost growth as the liberal team that run Russia’s macroeconomic policy – Ministry of Finance, Ministry of Economy and
the Central Bank of Russia (CBR) – become frustrated at the slow pace of growth. Russia’s economy expanded by only 0.5% in the first quarter of this year, well below even the most pessimistic forecasts.
Oreshkin urged the CBR to curb further growth of consumer crediting and
focus on investment, rather than consumption, as the main driver of growth. Fixed investment has also underperformed, contracting for four months in a row in May.
Despite measures undertaken by the regulator to cool the retail lending market, unsecured consumer loans in Russia keep growing, increasing by 25% year-on-year in January-March 2018, while nominal income is only growing by about 7%.
As reported by bne IntelliNews, most recently the World Bank (WB) and the Finance Ministry warned of consumer loans risks in Russia. The WB reportedly found that almost 60% of Russian's private borrowers faced problems with servicing that debt, while the ministry believes debt servicing costs impede income growth.
The CBR argued in the report that indebtedness has no significant influence on declining disposable incomes of Russians. The CBR also said that consumer lending in Russia accounts for 9% of average incomes which is considerably less than the 20%-30% that is normal in developed countries.
In the meantime, while the government signalled possible fiscal easing to support investment, the head of the CBR Elvira Nabiullina warned against unsealing sovereign reserves in the National Welfare Fund (NWF).
Rosbank on June 28 argued that the CBR's concerns are "reasonable, as this kind of investment would reduce the NWF’s ability to combat an economic crisis and thus dent the credibility of Russia’s fiscal and monetary policy mix."
The analysts believe that "using NWF
to invest domestically would lead to increased rouble volatility, either via an indirect increase in the cut-off oil price for the Ministry of Finance’s budget rule, or via reduced credibility for the CBR policy mandate."
“Almost 60% of Russian's private borrowers face problems with servicing their debt”
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