Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    Elvira Nabiullina Outlines Main Obstacles to Russian Economic Development

    ST. PETERSBURG, 4 July. /TASS/. The main obstacles to economic development in Russia come from within the country, according to the Governor of the Bank of Russia Elvira Nabiullina, speaking at the International Financial Congress 2019.

    “We are clearly living in a risk-free environment at the moment. Oil prices are considerably higher than expected, while our country is continuing to attract globalcapital markets. Consequently, the greatest obstacles to development, in my opinion, are domestic,” said Ms. Nabiullina. 

    According to the regulator head, economic growth is currently between 1.5–2%, amounting to a mere 0.5% in the first quarter on account of very low unemployment. “And that is what we are going to see if we do not make structural changes, because the policy of supporting macroeconomic stability only allows us to stabilise the economy in line with its current capacity,” stated Ms. Nabiullina. 

    Moreover, the Governor of the Bank of Russia noted that as things stand, Russia is largely protected from external risks and is equipped to deal with any potential spikes in volatility.

    “But I do not think that any of the attendees are under any illusions that keeping the economy in check is enough. On the contrary, it is possible that we are currently facing a more formidable challenge: economic growth is sluggish, businesses are not optimistic, household income is not rising in real terms, and people do not feel that the economic stability is giving them a better quality of life,” said the Governor of the Bank of Russia. 

    She added, “There is always a temptation to blame everything on external factors, but in reality, that is far from the truth.” 

    International situation remains unchanged 

    According to Governor of the Bank of Russia, there is no reason to believe that circumstances abroad will undergo fundamental changes in the foreseeable future. 

    “We have no reason to believe that the situation abroad will change fundamentally at any point in the foreseeable future. […] The external environment will remain challenging,” she said. 

    She believes that the Russian economy is not currently in a risky position. 

    “On the other hand, it [the geopolitical situation] is not that bad. In any case, we are clearly in anything but a risky position,” noted Ms. Nabiullina. 

    Investment climate 

    Elvira Nabiullina is of the view that the investment climate is one of the factors limiting economic growth. 

    “If there is one thing really hampering our economic growth, it is the investment climate above all else. If we do not change other factors, we will not improve the state of affairs,” she said. For example, according to Ms. Nabiullina, distributing cheap money will damage macroeconomic stability. 

    Improving the investment climate does not mean lowering administrative barriers, she noted.

    “We need to protect private property and independent judiciaries (particularly court settlements of corporate disputes), improve the quality of corporate management, and focus on human capacity building. We’ve been saying pretty much the same thing for years. Initially it made sense, became commonplace, but then the topic of the investment climate transpired into idle promises from officials, and now it is more like a cry of despair,” stated Elvira Nabiullina.