Anatoly Baranov: The financial results of the year 2001

The main result of the year 2001 on the financial markets is that there was no shock during the year and it all went as was forecasted. It is still profitable to save money on ruble accounts in banks, but the dollar accounts are still more secure.

It became clear a quarter before the introduction of euro cash - the new currency will not be competitive against dollar. It will not be more than just the regional money, although the region of its circulation is the richest in the whole world. But the level of euro’s dependence on dollar is rather high and the speculative reduction of dollar frightens Europe even more than the USA itself. The Europeans are totally not interested in the devaluation of dollar. So this makes it totally pointless – to have the euro deposits in Russia’s banks. Of course, if you are travelling to Europe, then it would be good to have euro cash, but if you have a dollar account on your credit card, there is no need to worry – the dollars will be automatically converted, if you make cashless purchases, in compliance with the European Central Bank rate.

The year 2001 was accompanied with a moderate growth of the Russian economy, like all experts said - around a bit more than five percent. The president said it was planned to have four percent of the economic growth, but five percent came out, which was good. It is hard to say that four percent is a good plan.

Presidential aide Andrey Illarionov said on December 20 that the economic policy of the state “exercised the incredible speed of degradation – faster than during the period of the first presidential cycle in Russia.” However, the absence of the thought-out and reasonable economic policy of the state is the reality, in which Russia has been living since the break-up of the USSR.

As it turned out, a growth was possible under these conditions. Russia gained the additional $32 billion owing to the foreign economic conjuncture in the year 2001 ($20 billion in 2000). The president’s aide believes that we could have the growth of 15% with such resources, but we got only five.

The reduction of the oil prices in the second half of the year 2001 showed that the resources, saved during the favourable conjuncture, allowed the country to be afloat. Mikhail Delyagin believes, that even further reduction of the oil prices will not lead to the significant consequences, for the citizens till August – September of the year 2002. However, the national currency stepped over the “magic” level of 30 rubles per dollar before the New Year, but this was not an indication of the devaluation. It is more likely a bad planning indication: the planning economy of the Soviet period suffered not because of the planning principle as it was. It was about the execution of the plans.

The economic growth for the next year is planned to be on the level of 4.3%, but that figure was calculated on the ground of the prices on the Russian oil - $23 per barrel. Since the contractual prices for the Urals oil will fluctuate around $17 the next year, then the calculation of the four percent growth becomes pointless. As Delyagin thinks, it is real to speak about the 3.5% growth. The growth in 1999 made up 8.3%, but the country had slowed down over the recent couple of years – two and a half times.

All these macroeconomic indexes may lead to the reduction of the situation on the financial market during the second half of the next year, when the currency reserves are going to be spent. Then a question will come up – about the mechanism to stabilize the economy. The manipulated inflation is very good for the industrial growth , but it is not a condition for it. This year we have had a very moderate economic growth against the background of the price rise, both in rubles and dollars. People could live in Moscow with a monthly salary of $100 in 1999, but now even the official living wage is somewhere around four thousand rubles per capita. Needless to say that life is bad with that money. Such a price rise can not be covered with a bank interest. The investments in the production sphere for the private persons, owning small sums of money – this is still a difficult issue.

We are actually having a strange economic growth that is not accompanied with the progress in small business, the activity of which is capable of protecting a common citizen from the inflation.

Everyone can look back and see from their own point of view – is there any economic progress? No? The top officials of the country have recently expressed their concern about the problem. The main reason for bad development here is not in high taxes, not in the absence of investments, but in the criminal and bureaucratic pressure with which any entrepreneur comes across. When the senior officials of the state (even the president in a live TV broadcast) seriously discuss the problems of the universal protection against criminality and red tape, anyone can easily perceive the inefficiency of the state administration.

There is some ideological trap in that for the president, who came to power with the help of “the KGB myth.” Putin has to achieve a positive result, which would be evident for everyone.

Unfortunately, the year 2001 has not justified the hopes of our citizens for the legal ownership and disposition of the foreign securities. The Russian citizens had some access to the world stock markets, our banks started rendering services, connected with the use of the foreign assets. But this happened at the moment, when there was a clear recession trend in the West, the yield dropped, even down to the negative level.

The events of September 11 were not a super shock for the stock markets of the world. The situation was far from being brilliant before the tragic date. Now the world’s largest airlines suffer from huge losses, there is a slowdown in the aircraft-building industry, which was earlier referred to the driving force of the progress. The recession in the high-tech industries has already become stable. So there is no point to hope for any dividend against such a background.

The USA has pulled out from the ABM Treaty and the development of the national anti-missile defense pushed the development of the high technologies – it actually pushed the entire American economy. Russia is not getting any good from that anyway. A domestic investor is supposed to have the domestic market orientation and it seems that the year 2001 will be the last year, when the economic growth of the country and the growth of the economic activity of the population, live by themselves. Otherwise, the growth will stop and there will be the recession developing very fast, with all the adequate consequences. A large industrial enterprise is surrounded with a crowd of innovative firms, private and even family companies, when this large enterprise is growing. The small companies around the principal one involve a lot of people working there. The governor of the Nizhni Novgorod region, Mr.Khodyrev had such a program during the elections, and he has already gained some results. This approach will probably become a role model in the year 2002. Otherwise, having the growth of investments on the level of 17% in 2000, we’ve had only 8% in 2001, and not more than 4% is projected in 2002. This is not connected with the absence of the funds, but with the irrational investments in the economic mechanism, which is actually called a criminal and bureaucratic mechanism. The small business is in the hands of those, who do not participate in the production, but at the same time they are not liable for the results; they simply try to get what they want and that’s all.

The Central Bank of Russia announced about the reduction of its gold and value reserves – for the first time after the crisis in 1998. The negative consequences of the decrease of the oil prices will cut the state reserves to the critical level by the middle of the next year. The country will have to face the issue of the GDP and the change of its structure. Most likely this will be done owing to the devaluation of the ruble, like it happened in the beginning of the 90s and in 1998. Unfortunately, the state stopped the reforming process at that time – right at the moment, when it was supposed to get the results.

Anatoly Baranov PRAVDA.Ru

Translated by Dmitry Sudakov