The global economy is facing a decade of slow growth that will make it harder for countries to service debts, Russian Finance Minister Alexei Kudrin said.
“The expectation now is that growth will be weak for three to 10 years,” Kudrin told reporters late yesterday in Washington. “We’re in for a lost decade. It’s already clearer that growth rates will be low and that the fight to keep growth from dying out will take many years. Most likely, about five to 10 years.”
Finance ministers and central bankers from the International Monetary Fund’s 187 member countries are meeting this week in Washington to discuss Europe’s sovereign debt crisis and a slowing world economy. This week, the IMF lowered its global growth forecast to 4 percent for this year and 2012 from a June forecast of 4.3 percent in 2011 and 4.5 percent for next year.
Policy makers may still prevent recession in key economies such as the U.S. and Europe, Kudrin said. Russia only faces risks of a recession if those regions contract, he said.
Russia’s government would act “decisively” to mitigate the consequences of a global recession, Kudrin said.
Russia, the world’s largest energy exporter, saw its economy contract 7.8 percent in 2009 as oil prices plunged from a record high. Kudrin, also a deputy to Prime Minister Vladimir Putin, predicted in January 2008 that Russia would be an “island of stability” amid global economic turmoil.
Can’t Shield Itself
The country’s leadership now recognizes that Russia would be unable to shield itself from such external shocks, he said.
“The past few days have shown that all of the risks being discussed are very real,” he said. “Some market indicators have already reached levels seen in the last crisis.”
The ruble fell yesterday to its lowest against the central bank’s target dollar-euro basket since September 2009 as Urals crude, Russia’s main export oil blend, had its biggest weekly drop since May. The Micex Index of 30 stocks dropped 12 percent in two days, the largest two-day fall since November 2008.
Concern about economic threats may be higher now even though the risks from the crisis may be less than in 2008, when the collapse of Lehman Brothers triggered a liquidity crunch that sent global markets plummeting, Kudrin said.
“In 2008, we didn’t understand the scope,” he said. “We didn’t understand the extent of our dependency on global markets. Today we’re seriously looking at all the zones of risk, so I’d say there’s probably more concern even though the crisis may be lesser than in 2008.”
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