In a sign that at least the monetary easing might become reality, Putin nominated Elvira Nabiullina, former head of the pro-stimulus economics ministry, to become Russia’s next central-bank chief.
So far, the finance ministry is holding out, noting that Russia already has a budget deficit despite the high energy prices. The state-owned investment bank VTB Capital estimates that the budget deficit will amount to 0.5 percent of gross domestic product in 2013, according to the RBC news service. At a conference held by the daily newspaper Vedomosti, Deputy Finance Minister Alexei Moiseyev attacked the appetites of “development” champions, saying that state-owned companies commonly submit proposals for projects costing more than $30 billion.
“Government investment in this country necessarily means big corruption costs and inefficiencies in assessing investment projects,” said Valery Mironov, head of the Development Center think tank, in an article on the Free Press website. “When money is parked in U.S. bonds, it loses its value much more slowly than when it falls directly into our bureaucrats’ hands.”
Economists such as Mironov are battling a rising tide. Putin, who has always protected Russia’s reserves, seems to be more willing to listen to the advocates of higher spending. In his third term in power, the president is increasingly turning back to a Soviet approach, bringing back the Hero of Labor award and stepping up anti-Western rhetoric. Acting on the advice of Soviet-era economists would fit the mood.
Leonid Bershidsky, an editor and novelist, is Moscow correspondent for Bloomberg’s World View.