The year 2009 and its results review: IBA president's version

The Russian economy, which had been developing at high speed prior to the global financial turmoil that later progressed into an unprecedented economic downturn, has suffered severe losses in the recession, making its future prospects uncertain at present. One good news may be that high inflation, which has been a major problem in the country, has somehow been reduced, though at the expense of shrinking consumption and demand. This is evident in the retail sales figures, which fell to the lowest level in August, as it mirrored a 6.8% decline in citizens’ disposable incomes in the month, the highest in 2009. In order to inject anticrisis fund into the economy, the Russian Central Bank has lowered its refinancing rate several times since April, bringing it down fr om 13% to the current 9.5%. However, the capital inflow into the economy has not been entirely smooth. Although the Russian government has paid special attention to people's livelihood while dealing with the crisis, including raising pensions, many citizens are not entirely satisfied with the state’s current anticrisis measures. Numbers fr om the Federal State Statistics Service have shown that between 10,000 and 15,000 have been lost every month since January, and this refers to almost all sectors of the economy. There might be a surge in unemployment in the near future, triggering another outbreak of crisis. 

Meanwhile, the global financial crisis has fully exposed the deficiency of the Russian economy as it heavily relies on energy industry and overseas market, a tendency that apparently cannot be reversed in a short time. The economic situation of Russia thus remains highly uncertain because of the unsteady pricing development in the energy sector. The current rally of oil prices may only last for another six months before they nosedive again. In the current circumstances, the Russian government’s plan to turn ruble into a global reserve currency may suffer setbacks. Besides, even if the government accelerates pace of diversification of its economy, global investors would possibly accept ruble as a strategic reserve currency in no less than 10 years. Nevertheless, the government remains confident in its economy, believing it will return to its pre-crisis level by 2012. 

The impact(s) — pluses and minuses — of the global crisis on the Russian industry

It would be wrong to compare how the U.S. and Russian markets have reacted to this economic crisis. The U.S. economy goes through a crisis at least once every ten years, and therefore, has developed a sort of immunity to these periodic shocks. This includes a legislative block and rules guiding the government’s reactions to these recurrent meltdowns. As for Russia, this is only the country’s second major shock in its contemporary history, and therefore, is still not used to such recurrences, and hence, does not yet fully know how to react. The country still believes in certain ideals regarding the free market philosophy. Now, more and more people are beginning to understand that liberal economics has its pluses and minuses. The export-oriented industries will be the first to benefit fr om the global recovery and spring back to life. These include metals, especially non-ferrous metallurgy, as well as oil and gas companies. However, due to domestic consumption, the gas companies will benefit less. 

“In general, the overall effectiveness of the government’s anticrisis measures has been seriously diluted by the abundance of profound structural ‘fundamental flaws’ in the local economy.”

Your assessment of the effectiveness of the anti-crisis measures/strategies

The Russian government has put up sizeable stabilization and support programs and other measures to combat the effects of the financial crisis. But the overall expected effectiveness of these measures has been diluted by the ‘fundamental flaws’ in the structure of the economy, its ‘underdeveloped’ financial system, the ‘lack long-term vision’ in the state’s emergency measures, lack of commitment to competitiveness on the domestic market, etc. It is time that anticrisis strategists realized that no matter the programs adopted, there is no alternative to private business taking the center stage in overcoming the current recession. During a crisis, it is imperative to have a full-fledged public dialog between the state, business and society at large, particularly as living standards decline. This dialog cannot be limited to anti-crisis measures; it must also focus on post-crisis conditions, including the fate of the country’s political system and financial-economic institutions. The crisis is impacting on Russia’s regions unevenly. Besides, communication between the federal center and the regions has now developed into a key problem for the state governance system, in addition to the other specific side effects from the crisis. The central government is better prepared for the crisis than the regional governments, and this is becoming more and more apparent in the hardest hit regions. 

Achievements of your organizations in 2009 and their plans for 2010 

We introduced 100% worsted vicuna fabrics and new fabrics gold and platinum collections and also hired new staff in 2009. I also won the IBA presidency for two years, unopposed. With regard to our future plans, my company plans to open a new branch in Yekaterinburg, introduce new fabric collection with titanium, etc.

Your prognosis on the Russian economy for 2010 

The Russian economy remains highly dependent on the extraction of natural resources. Some two-thirds of export revenues and over half of the federal budget incomes are derived from oil and natural gas, which makes Russia highly dependent on the developments on the global energy market. The available forecast assumes that the average future oil price will track the price movements on the international futures market and hover around $80 throughout 2010.