Lagarde Says Russia Growth Stabilizing

The managing director of the International Monetary Fund Christine Lagarde said Russia has done a good job maintaining macroeconomic stability given declining crude prices.

“Against the backdrop of falling oil prices, Russia had proceeded to, or would proceed, she hopes, on the track of sustainable growth,” Russian Deputy Minister of Economic Development Stanislav Voskresensky quoted Lagarde after the APEC leaders’ meeting with the IMF managing director, RT reported.

Voskresensky also spoke about Lagarde’s meeting with President Vladimir Putin.

Responding to Putin’s question about Russia’s financial sector, Lagarde said the country’s authorities, including the central bank, have been doing a fantastic job.

Putin cited the latest macroeconomic data and asked for Lagarde’s advice concerning the banking system.

Lagarde said the banking system is stable but very passive and is not contributing much to economic growth as there is little active lending.

Putin asked what she thinks should be done, but Lagarde ducked the question, saying only that it depends on each individual case and a country’s specifics, according to Voskresensky.

The IMF head also said that she didn’t rule out growing protectionism after the presidential election in the United States.

“As the United States is going to have a problem with the current account, hence, the dollar growth will entail falling exports and, given the results of the presidential elections, America may become still more aggressive in protectionism than it is now,” Voznesensky said, quoting the IMF managing director.

Meanwhile, another report says Russia’s real GDP growth shrank in the third quarter on a year-on-year basis; however, the pace of contraction was not as deep as was projected by several analysts, EconoTimes reported.

The third quarter data was released on November 14, which showed that the nation’s economy shrank 0.4% year-on-year. But the reading was less negative than the projections made by analysts, which gives additional evidence that Russia’s economy is bottoming after its deep recession in the past two years.

The year-on-year economic growth rate of Russia is expected to turn positive again in the fourth quarter and remain positive throughout next year, said Wells Fargo in a research note. A breakdown of the GDP data into its underlying demand component is unavailable; however, the monthly data could give some information on the stabilizing economy of Russia.

For example, the trade balance of Russia expanded to $7.4 billion in September from $4.9 billion in August as values of both import and export surpassed consensus expectations. Relatively higher oil prices in the third quarter, as compared to the earlier quarter, assisted in stimulating the total exports’ value.