Russia and other emerging markets won't escape the blowback from the global financial crisis and Russia will likely face slower growth than expected, its finance minister said Sunday.
In remarks at the annual conference of the Institute of International Finance in Washington, Alexei Kudrin said emerging economies such as Russia, India, Brazil and China "are not on the margins" of the crisis. "We will be pretty much in the epicenter of this crisis."
Kudrin said the International Monetary Fund's forecast for Russian gross domestic product growth of 5.5% for 2009 now looks "very optimistic," and that "within two or three months, we'll see a more realistic picture" of growth.
He said that in the light of the global financial crisis, the U.S. and European economies now seem "on the verge of a very serious recession."
Kudrin laid the blame for the crisis on Washington, saying it was the period of ultra-low U.S. interest rates in 2003-04 that sparked the asset price bubble that has now burst. He said this suggested that the "fundamentals" of economic management in developed nations "were not really good."
Russia has already announced a $180 billion package for its financial system, including liquidity provision and help to refinance foreign debt. It has made available to its banks $35 billion in five-year loans in the form of subordinated credits.
However, Kudrin said the government stands ready to do more.
He said the government was prepared to make more capital available to private and public banks and would work "more thoroughly" on this problem. He also said the government was "considering action to buy our bad assets."
As for state-owned institutions OAO Sberbank (SBER.RS) and OAO Bank VTB (VTBR.RS), he said these would be "supported in any circumstances."
The government will do whatever is needed "to make sure that these banks do not have risks" and that they continue to allow the smooth functioning of Russia's payment systems.
Despite the depth of the global financial crisis - and the multitude of small Russian financial institutions - Kudrin said he didn't believe many domestic banks would fail.
Kudrin also said that Russia's sovereign wealth fund has continued to make profits despite the current crisis, largely because of its exposure to government bonds. He said the high demand for such assets means authorities are now "discussing" what kind of exposure to have to sovereign debt.
The finance minister also used his speech to deliver a message that Russia wanted a close relationship with Western developed nations, despite this summer's war with Georgia.
"We are interested in cooperation with all the leading nations," Kudrin said, adding that these relationships "are not ... dependent on the events that took place."