Russian govt handles inflation as GDP falls.

MOSCOW, December 31 (Itar-Tass) - The Russian government succeeded in
curbing inflation in the outgoing year, but the GDP and employment
situation figures spoilt the overall picture.

The year 2009 because a year of trials for the governments in many
countries. The crisis aggravated the problems which earlier had remained
hidden behind the flows of capital, large budget revenue, loans and the
availability of jobs.
The world financial and economic crisis hit the banking system in the
first place, which blocked credit flows inside the countries and abroad.
Later, other sources of economic prosperity collapsed like the houses of
cards.
Regrettably, the crisis did not give much time to governments to
ponder the solution of the economic problems, so anti-crisis measures were
not the same in different countries: for example, governments provided
assistance to companies in the form of guarantees, bought stakes in
rundown enterprises, prohibited bonuses to top managers, and dramatically
cut budget spending.
According to Prime Minister Vladimir Putin, Russia spent at least 12
percent of its GDP to revive the economy. The priorities in financial
assistance were clear in the beginning of this year, when the Cabinet was
just working on a package of anti-crisis measures (the program was
approved in April): the support of the banking system (the lowering of the
Central Bank's refinancing rate, the provision of subordinated credits,
the buyout of bankrupt organizations), the manufacturing sector (subsidies
and loans, an increase in defense procurements), and the labor market (the
federal center allocated money to the regions provided they had effective
programs to support that sphere).
At the same time, the success of the governments' anti-crisis struggle
was not the same for all these priorities. Preliminary results indicated,
the financial sphere has survived. As Finance Minister Alexei Kudrin
acknowledged, "the government never paid that much attention to bankers
and, perhaps, will never do so again."
The government allocated more than one trillion roubles directly from
the budget, from the Reserve Fund, and the national welfare foundation;
it tapped the survival kit to enable the financial system to withstand,
and not to decrease the volume of credits at the moment of the crisis,
according to the minister.
As a result, the government kept the financial system from collapse.
During the crisis, the volume of loans granted by state-run banks
increased by 1.2 percent, while the volume of loans extended by other
banks, decreased by 0.8 percent.
Therefore, the volume of credits remained at the pre-crisis level at
some 12 trillion roubles.
The crisis severely depleted the Reserve Fund. It decreased to 1.8
trillion roubles by the beginning of 2010 (in early 2009, it exceeded 4
trillion roubles).
Thanks to the assistance to the financial sector, the government
succeeded in meeting the inflation targets, for the first time in the past
few years. The inflation rate will not exceed 9 percent in 2009, whereas
in 2008, consumer prices jumped by 13 percent.
In the beginning of this year, the government made more pessimistic
inflation forecasts, estimating the inflation rate at 15 to 20 percent.
Thanks to the coordination actions by the government and the Central
bank, it was possible to prevent "the all-out devaluation, and keep
financial stability," President Dmitry Medvedev said.
The Gross Domestic Product was the key government problem, especially
in the first half of this year. Government analysts predicted in early
2009 that recession would not exceed 0.2 percent, but the present-day
estimate is that the GDP has slumped 8.5 percent, and industrial
production - 11.5 percent.
"By the arithmetic indications of the GDP, industrial production and
investments, we've been flung back during the past 18 months by 2 to 2.5
years at the maximum - to the beginning of 2007," presidential aide Arkady
Dvorkovich said.
The worst hit sectors were exports of oil and gas, metallurgy,
chemicals, the processing sector and machine building.
Prime Minister Vladimir Putin said however, that the country's'
economy began to grow in the second half. Aerospace posted a 13 percent
increase, the defense sector grew 3.7 percent, and aircraft making,
shipbuilding and agriculture showed upward trends.
In Russia, the crisis affected the labor market, as elsewhere in the
world. Although the government succeeded in avoiding "rather tragic
scenarios," Dvorkovich believes that by the employment indicators, Russia
slid back to the level of 2005.
Official unemployment peaked in the spring at 2.2 million, and overall
unemployment reached 7.7 million.
Although the unemployment growth rates began to decrease, the number
of the officially registered unemployed drew by 1.3 percent to 2.1 million
in the last week of the outgoing year, according to official statistics.
-0-myz