Russian PM wants cheaper credit to stimulate economy

Fri Nov 1, 2013 4:54am EDT
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By Stephen Adler and Timothy Heritage

MOSCOW (Reuters) - Russia must boost the flow of credit to businesses to promote an investment-led recovery but will not throw fiscal caution to the wind to overcome the drag on the economy from weak exports, Prime Minister Dmitry Medvedev said.

In an interview with Reuters, the former president said he saw no contradiction between fiscal consolidation and economic development, and said the government would press on with privatization at the right price.

The priority, he said, was boosting growth which he said was too low at an expected level of less than 2 percent this year after averaging around 7 percent for much of the decade before the global crisis of 2008-09.

"What are we planning to do? A series of measures of course, but there is no magic formula to boost growth. In any case, if there is, we do not know what it is," Medvedev said in an interview late on Thursday.

"Our Chinese partners probably know it, but we don't," he added, reflecting on China's stronger economic growth of the last several years.

Medvedev, 48, said a vital first step to steer the $2 trillion economy away from recession was to ensure affordable credit flows into the economy.

This position sits uneasily with that of new central bank chief Elvira Nabiullina, who has said that cheaper credit might not help the economy and could be counter-productive.

The central bank has held its main interest rate of 5.5 percent steady for more than a year despite pressure to reduce it but the costs of borrowing, even for large companies, is usually around 9 or 10 percent.   Continued...

Russia's Prime Minister Dmitry Medvedev (R) speaks with Stephen Adler (front L), Editor In Chief, Reuters News, and Timothy Heritage, Bureau Chief, CIS, during an interview with Reuters in Moscow, October 31, 2013. REUTERS/Grigory Dukor