Igor Shuvalov, Russia’s liberal deputy prime minister, threw down the gauntlet to the country’s powerful energy and metallobbies yesterday, saying several years of low commodity prices would help to create a more modern economy. "The longer we have low commodity prices, the sooner we will have a new model of our economy," Mr Shuvalov told the Financial Times. "Even now people say, ‘Don’t worry, in a year all the prices will come up again and you’ll have your annual budget completely full of money and you will carry on’. "But that’s not good. It’s better if we have two, three, five years as a difficult period."
Mr Shuvalov, a leading liberal in Vladimir Putin’s government, is supported by Alexei Kudrin, the finance minister, and Elvira Nabiullina, economy minister, in pushing for a diversified economy. But they face opposition from conservatives who believe in Russia’s traditional role as a commodity exporter, notably Igor Sechin, the other deputy prime minister. The liberals this month won Mr Putin’s backing in a bruising battle over the 2009 budget. They succeeded in limiting the planned budget deficit to 7.4 per cent of gross domestic product and concentrating resources on general measures to revive the recession-hit economy, including support for the banking sector, instead of generous hand-outs for specific companies and industries. Infrastructure spending will rise above 2008 levels, but by less than originally planned.
Igor Yurgens, head of the Institute for Contemporary Development, a think-tank chaired by Dmitry Medvedev, the president, said: "We have seen the victory of the non-spenders over the spenders . . . Some of the spenders now hate Kudrin’s guts and hate Shuvalov’s guts." But he cautioned against seeing a political dispute in the economic argument, saying the Putin-Medvedev team remained strong. The government is investing in education, science and the development of new technologies but they will require time to come to fruition. Mr Shuvalov said: "Russians, it’s proven by our history, can invent new technologies, we can implement them and we can even sell them. But once you have this money coming from the oil rain, it completely spoils everybody."
He said Russia had sufficient funds to respond to the global economic crisis by running budget deficits for three years. The country has $376bn in reserves, in spite of having spent $200bn supporting the rouble since last summer. Mr Shuvalov said the government was making adjustments and was hoping that economic growth would revive. But he indicated the country was ready, if necessary, for radical action, including further budgetary restructuring. After 7.4 per cent this year, the government envisages deficits of 5 per cent next year and 3 per cent in 2011. For 2009 it predicts a GDP decline of 2.2 per cent, with a modest recovery later in the year compensating for the deep recession that Russia is suffering. GDP fell 8.8 per cent in January and 7.3 per cent last month.
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