MOSCOW, April 4 (AFP) - For all the political uncertainty of the
past two weeks, Russia's new prime minister will inherit an economy
with potential for growth if tight fiscal targets are met, analysts
said Saturday.
The aftershocks of the Asian financial crisis are still rippling
through the economy, the global oil price slump is threatening
Russia's trade balance, and budget finances remain precarious.
Russian stocks ended the week almost 10 percent lower than they
started -- a drop which brokers attributed largely to the political
turmoil triggered by President Boris Yeltsin's dramatic government
shake-up.
"If the situation were just a little clearer, for better or
worse, then investors could plan their strategy a little better,"
said broker Mikhail Koltsov.
Yeltsin's surprise choice to replace prime minister Viktor
Chernomyrdin -- the young technocrat Sergei Kiriyenko -- still has
to be approved by parliament, and more hard bargaining is expected
at roundtable talks set for Tuesday.
But analysts pointed to positive signs that the new government,
once confirmed, would remain committed to the tough economic
guidelines mapped out with the International Monetary Fund.
On March 23, Yeltsin said his dismissal of Chernomyrdin and his
cabinet would result in a "new, strong" team taking over which would
revitalise Russia's market reforms.
Yeltsin later announced his intention to keep reform champion
Mikhail Zadornov on as finance minister -- a welcome sign for
investors alarmed by his dismissal of first deputy prime minister
Anatoly Chubais, architect of Russian privatisation.
Christopher Granville, chief economist at United City Bank, said
much would depend on the new government's commitment to the
so-called Fischer-Kudrin plan, which calls for drastic
administrative savings and measures to boost revenues.
The action plan, named after IMF First Deputy Managing Director
Stanley Fischer and First Deputy Finance Minister Alexei Kudrin, was
agreed in November.
Kudrin recently announced plans to cut 208,000 public sector
jobs, including 68,000 teachers and 22,000 health workers, but
Yeltsin later condemned such a move, raising doubts about whether
the Kremlin would swallow such bitter medicine.
The government's dismissal meant "a loss of coherence in the
implementation of detailed policy, especially with the departure of
Chubais. But the markets don't take a simplistic view, and Chubais
is not life or death for the reforms," commented Granville.
"Implementation of the Fischer-Kudrin plan might be more
energetic and coherent with a new leader, especially Kiriyenko," he
said.
Boosting woefully inadequate tax revenue remains a priority,
Yeltsin reminded Russians in a radio broadcast Friday.
For the first time since market reforms were launched in 1992,
Russia last year posted modest growth in gross domestic product, at
0.4 percent.
"There will be further economic growth this year. The shadow
economy is underestimated, and the economy as a whole is growing
faster than the official figures indicate," said Vladimir
Drebentsov, a World Bank economist.
According to Granville, the impact of the Asian crisis "is still
a very heavy burden, and the government needs to get the budget
deficit right down."
"They will never get interest rates down when they need to
borrow at present rates. A reasonable level would be under 10
percent for treasury bill yields, but they are now at 28 percent,"
he said.
Granville predicted that "growth will remain modest -- it is
almost an automatic result of stabilisation, which is in the bag."
Inflation for the first quarter of 1998 was 3.1 percent, down
from 5.4 percent for the same period of 1997, Interfax reported,
citing the State Statistics Committee.
Drebentsov said the oil price slump "complicates the trade
balance ... but more depends on whether new investors come to
Russia, both to reduce the cost of debt servicing and to restructure
the economy."
The recent adoption of new laws to tighten the rules concerning
bankruptcies and accounting procedures would encourage investors,
Drebentsov said. |
