Thursday June 4, 05:10 PM
'Russian Davos' kicks off amid economic worries
By Eleonore Dermy
SAINT PETERSBURG (AFP) - Russia on Thursday opened its premier economic forum but with worries about the timing of the economic recovery diluting an event marked by swaggering confidence in previous years.
The Russian Central Bank announced it would carry out its third interest rate cut since the end of April in a bid to stimulate growth in an economy that the government fears could contract by up to 8.0 percent this year.
The Saint Petersburg Economic Forum is as usual being attended by a constellation of Russian politicians and businessmen -- including the country's unloved oligarchs -- as well as four foreign heads of state.
Economic Development Minister Elvira Nabiullina warned that Russia's economy would only start to recover from the crisis by the end of this year or the start of 2010 amid declining consumer demand and investment.
"We hope that there will be a recovery of our economy by the end of this year or the start of next year," she told the Vedomosti newspaper in an interview to coincide with the forum.
"There is some talk that there is a recovery now in the world economy," she added.
First Deputy Prime Minister Igor Shuvalov said he saw improved prospects for Russia's long-stalled effort to join the World Trade Organisation.
Speaking after talks with a US trade delegation at the forum, Shuvalov said: "We want in a minimal period to agree and solve all differences," ITAR-TASS reported.
Russia's economy, dependent on exports of hydrocarbons and raw materials, has been hit badly by the economic slowdown although the government has fought hard to prevent any repeat of the 1998 crisis when it defaulted on debt.
Nabiullina said the forecast of a 6.0 to 8.0 percent contraction in gross domestic product in 2009 compared with 2008 was justified given that the economy had shrunk 9.5 percent in the first quarter year-on-year.
Russian officials have scored one confidence-boosting victory in recent days, with an agreement by state-owned Sberbank to help bail out the Opel car maker.
Sberbank chief German Gref, a former economy minister, said the aim was to help restructure Russia's limping car industry and explained that the bank would eventually pass on its 35 percent stake in Opel, probably to a Russian investor.
"The essential purpose of this purchase is to help in the restructuring of Russian assets," said Gref. He went on to praise the Canadian firm leading the Opel rescue, Magna International, which has carried out major investment in Soviet-era car manufacturer GAZ.
Meanwhile the Russian central bank's board of directors decided to cut the key refinancing rate, effective on Friday, to 11.5 percent from 12.0 percent, the central bank said in a statement.
The bank is using the cuts as a means to stimulate economic activity amid diminishing concerns over the ruble's value and inflation, but some analysts remained unimpressed.
"The Central Bank of Russia's latest interest rate cut is unlikely to do much to help the ailing economy," commented Neil Shearing of Capital Economics in a research note.
The budget for the three-day event in the former imperial capital has been slashed by a quarter compared to recent years.
"Everyone is experiencing problems with forums now, not only us but Davos too," a Kremlin (Frankfurt: 513350 - news) official told reporters, referring to the World Economic Forum in Switzerland.
Russia pulled out all stops in recent years to turn the forum in Saint Petersburg, home town of Medvedev and the country's powerful Prime Minister Vladimir Putin, into a top economic event.
In an indication of the problems faced by debt-ridden companies amid the economic crisis, the head of the board of directors at aluminium giant UC Rusal acknowledged that the firm would not meet a deadline on restructuring debts.
Viktor Vekselberg said the company, owned by Russia's one-time richest man Oleg Deripaska, would not be able to agree a restructuring of billions of dollars in debt with international creditors by a June 11 deadline.
In another blow to Deripaska, Putin on Thursday visited a town where hundreds of workers have protested and blocked a road in anger at late payment of wages by the main employer, a cement factory that is part of the oligarch's business empire.
"They (the factory owners) have made thousands of people hostage to their ambitions, unprofessionalism and maybe simply greed," said Putin on a tour of the facility.
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