After the transition to a floating exchange rate of the ruble in late 2014, Russian economic policy “under the guise of inflation targeting contains elements of shock therapy,” he said in an interview with Bloomberg Sergei Glazyev, Advisor to the President of the Russian Federation, at one time considered a contender for the post of Chairman of the Bank of Russia.
Eye agree with President Vladimir Putin that the shock therapy is not suitable for Russia. But here the similarity ends, the Agency said.
Advisor to the President contested the decision to let the ruble float freely. While the Central Bank considers that a more flexible exchange rate helps the economy to survive the most ambitious in a generation a collapse in oil prices, Glazyev said that the effect of it is similar to the “DC earthquake for large multi-storey city”.
“Why is it an artificial earthquake to cause, if the Russian monetary and financial system has excessive margin of safety, allowing you to easily maintain a stable exchange rate? – said Glazyev. – The course must be sufficiently stable so that business can plan long-term investments”.
“Prohibitive” interest rates planted already fallen into recession the Russian economy on starvation rations, said the eye. The transition to a floating exchange rate did not save the country from economic shocks, but caused “enormous damage”, failing policy of inflation targeting and destroying “most of the investment plans of Russian enterprises”, he said (the interview was conducted before last Friday, the CBR kept the key rate at 10%).
Glazyev explained that insisting on not fixing the exchange rate and the stability of the ruble, pointing to examples of countries, including China, who used their currency to encourage investment and economic growth.
Bloomberg characterizes Sergei Glazyev, leader of the nationalist Rodina party, who in 2012 was appointed to the post of Advisor to Putin to improve relations with the former republics of the Soviet Union in the framework of integration plans of Russia. In addition, he is also a member of the National financial Board of the Bank of Russia and is preparing “alternative” program that should compete with the plan of former Finance Minister Kudrin, who now also serves on the Board.
Kudrin proposes to focus on reducing the budget deficit, curb inflation and to implement reforms that will lift economic growth to 4% in 2018 and 2019. The eye relies on the stabilization of the ruble and the release of internal investment potential for modernization of the economy.
The eye, according to the Agency, the most notable proponent of the stimulus, which is against the economic consensus, which puts him on the other side of the fence by Putin and the head of the Central Bank Elvira Nabiullina. He offers to take a sample of the era of post-war reconstruction of Germany and Japan. The increase in available credit for business up to 4 trillion rubles (64 billion) from 200 billion would reach 8 percent economic growth, he said the Agency.
“I’m sure my suggestions will be in demand, – said the presidential adviser. – Consequences of economic policy have already turn into a disaster for the left after the shock treatment from manufacturing industries and construction”.
According to estimates Glazyev, the Russian economy is suffering from underfunding by at least 5 trillion rubles, which he offers to pour with the help of refinancing instruments. It’s not so much compared with the growth of social tension due to the impossibility of self-realization, he says.
While inflation will remain under control, including the fact that the choice for the buyer will increase, and the competitiveness of Russian goods will increase, predicts Advisor to the President.