Easy Money Won’t Fix Russian Growth Problem, Central Banker Says

(Bloomberg) -- Russian central bank Governor Elvira Nabiullina issued her starkest warning yet against finding “quick fixes” for the nation's sluggish economic growth.

“The main risk to our development now is from ourselves,” Nabiullina said at the International Financial Congress banking forum in St. Petersburg on Thursday. “If we try to use cheap money to mask our structural problems, we'll just be wasting more time. We'll lose the macro stability we've spent so much time building.”

Tight budget and monetary policies have increased Russia's resilience to external risks in recent years, but with President Vladimir Putin's popularity sagging, the Kremlin is eager for ways to boost living standards. Russia's Finance Ministry suggested last month that the nation should start spending some of the tens of billions of dollars saved up in a rainy day fund to spur growth. Nabiullina has publicly opposed the idea.

Russia's federal budget ran the widest surplus in a decade last year, but incomes are expected to fall for a sixth year in 2019. The economy grew 0.5% in the first quarter from a year ago, the slowest pace since 2017.

Prospects for easier monetary policy across the developed world are making it easier for emerging markets to amass dollar debts. Nabiullina said that Russia is not immune to risks posed by low interest rates despite its low levels of external debt. The only way to fix Russia's growth problem is through structural reform and improvements to the investment climate, she said.

“Growth is low, businesses aren't optimistic, incomes aren't growing and people are struggling because stability hasn't givent them a better quality of life,” Nabiullina said. “Of course it's easy to put that down to external factors, but that's not the only driver, by a long way.”

To contact the reporter on this story: Anna Andrianova in St Petersburg at aandrianova@bloomberg.net

To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Natasha Doff, Paul Abelsky

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