Russian government takes flak as it fails to stem economic crisis

Russian government takes flak as it fails to stem economic crisis
Russia's President Vladimir Putin.

MOSCOW - Faced with a crippling recession, Russian authorities are coming in for growing criticism from economic insiders concerned over a lack of clear policies to deal with the crisis.

After a year that saw growth slump and the ruble nosedive on the back of falling oil prices and Western sanctions over Ukraine, officials have predicted that Russia's economy will contract by some five per cent in 2015.

As government income shrinks, the overall rate of inflation also looks set to hit around 17 per cent by spring.

And -- with the situation hitting the wallets of ordinary Russians -- alarm bells are ringing that the authorities under strongman President Vladimir Putin are floundering in their efforts to find a way out.

"I have read all of the government documents and I did not understand the aim of their economic policies," said Herman Gref, head of Russia's largest lender, Sberbank.

Speaking at an economic forum in Moscow last week, Gref, a former economy minister and member of the Kremlin's marginalised liberal clan, called for a "radical" shift in direction to restore global confidence in Russia's battered economy.

But, for now, these appeals for a sharp change of tack seem to be having little impact.

Alarm bells ringing

Taking to the podium at the same event, Prime Minister Dmitry Medvedev promised increased assistance to pensioners and large families and insisted that Moscow had no intention of turning its back on globalisation or plans to transform the economy into a "Western model".

Like Putin before him, however, he failed to announce a single concrete measure or reform, leaving his ministers to debate how best Moscow should be using its roughly US$385 billion (S$510.78 billion) of reserves or whether the country needs to be tightening its belt.

"This is what I feared: the discussion focused on how much we should be spending and for how long. This is the worst model of economic policy," responded Gref to the Kommersant newspaper.

Over the past month the Russian government has scrambled to put out the growing number of economic firestorms. It has stepped in to bail out struggling banks, supported faltering airlines and unblocked funds for infrastructure projects.

On Friday Medvedev announced a series of "crisis meetings" aimed at tackling the problems battering different sectors of the economy.

But the steps taken so far have left some experts scratching their heads.

Leading business daily Vedemosti this week denounced the "contradictory measures" between supporting some sectors and plans to slash spending for others.

"In a time of crisis, it is better to do nothing than to be all over the place," the paper wrote.

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