Russian Federation and the IMF |
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Press Statement An IMF staff team visited Moscow during October 2-10, 2003 to assess recent economic developments and prospects, focusing in particular on budgetary policies and the overall macroeconomic stance, as well as on structural reforms. The mission found that the macroeconomic situation had strengthened considerably. Real GDP is set to grow by 6 ¼ percent in 2003 and is expected to slow only marginally in 2004, to about 5 percent, on the assumption of some decline in oil prices in world markets. The balance of payments is also expected to remain strong. In particular, the renewed increase in private capital outflows seen in recent months is expected to reverse as monetary conditions tighten and the political uncertainty associated with the approaching elections dissipates. The recent upgrading to investment grade of Russia's external debt may also play a role in this reversal. As to macroeconomic policies, the mission welcomed the target of reducing inflation to 8-10 percent by end 2004, stressing that policies should aim at the lower end of this range. This would require monetary policy to be more firmly focused on inflation control, with increased exchange rate flexibility to absorb unexpected variations in the balance of payments. It would also require a tightening of fiscal policy, which would help the CBR in controlling money and inflation and reduce pressures for a real appreciation of the ruble. The mission noted, however, that the fiscal stance, after allowing for the effect of high oil prices, has been loosened substantially over the past two years, and plans for an amendment to the 2003 budget to allow additional expenditure will further relax the stance. The proposed 2004 budget implies no significant tightening. The mission supported the plans to save in a stabilization fund oil revenues over and above what would be collected at an oil price of US$20 per barrel. The mission expressed concern that the pace of structural reforms has generally remained slow in 2003 and that the reforms most important for the transformation of the economy away from its dependence on primary commodities have been lagging behind, notably reforms of the banking sector, natural monopolies, and the civil service and public administration. |