MOSCOW (Reuters) - Any further loosening in Russian fiscal or monetary policy would risk fuelling imports and driving up the exchange rate rather than boosting growth at home, the International Monetary Fund said on Wednesday.
The central bank should lean towards tightening monetary policy instead as the economy is already expanding at close to its potential growth rate, the Fund said after a fact-finding visit to Moscow by mission chief Antonio Spilimbergo.
“Fiscal or monetary relaxation would not result in higher growth... This would probably result in higher imports and appreciation of the exchange rate,” the mission chief told reporters.
Spilimbergo’s message contrasts with that of Russian bankers and government officials, who have urged the central bank to cut rates as inflation has stabilized while economic growth is slowing. Russian President Vladimir Putin has also expressed concern that economic growth is losing steam.
The IMF, which lent billions of dollars to Russia during the 1990s, is no longer a creditor but keeps tabs on Moscow’s fiscal and monetary policy framework and has fed in ideas for Moscow’s presidency of the Group of 20 economies this year.
Spilimbergo, concluding a week-long mission, said the Fund expected the Russian economy to grow this year at around the same rate as last year’s 3.7 percent, accelerating slightly to 3.8 percent next year.
Russia ran a balanced budget last year but with the price of oil, its main export, above the level plugged into budget forecasts, there was no room for complacency on the fiscal front.
Indeed, a fiscal rule passed last year to gradually lower the price at which the budget would balance to below $100 per barrel might need to be tightened.
“We believe that (the rule) could be stronger,” Spilimbergo told a news conference.
Monetary policy should stay on hold for now but maintain a tightening bias, the Fund said, adding that Russia’s central bank should be ready to take further action to head off price pressures if no steps towards more fiscal adjustment are taken.
Russia ran a balanced budget last year, but expects a deficit of 0.8 percent this year and will need to attract money to finance it. There is a concern that the budgetary needs will be filled by inflows of short-term capital that in the past have driven the rouble higher very quickly.
Inflation is expected to ease slightly this year to around 6 percent from 6.6 percent at the end of last year but will remain above the medium term target without further policy action, the Fund said.
Reporting by Maya Dyakina; Writing by Lidia Kelly; Editing by Douglas Busvine and Hugh Lawson