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Russias Economic Decline Over Fairly Soon, Long Recovery

Interview with Shigeo Katsu, World Bank Vice President for Europe and Central Asia Region

The economic decline is expected to be over soon in Russia, but several years will be required to return to pre-crisis levels, World Bank (WB) Vice President for Europe and Central Asia Shigeo Katsu said in an interview with Prime-Tass.

We believe that the economic decline will be over fairly soon but the growth curve will not be very steep. Several years will be required in order to return to pre-crisis levels, Katsu said.

Our economists assume that efforts over several years will be required to get back to the high-economic-growth situation. Perhaps, the economy will return to the pre-crisis level in 2012, he added.

Russias gross domestic product (GDP) is expected to fall 8%-9% in 2009, while the fall was at 10% in the first six months of the year, Katsu said, adding that this means that in the second half of the year some positive growth will be achieved.

At the same time, he said recovery will take a long time and we should not be deceived by the shoots of economic growth that everybody is looking for.

He commended the Russian government for its economic stimulus plan, by saying the Russian authorities managed to develop a comprehensive anti-crisis package, but it will take some time before the package can produce certain outcomes.

Katsu also said that Russia will overcome the crisis, but it will not be easy, especially given the difficulties with financing in 2010.

There is still a surplus of the current account. But the capital account balance looks less healthy since there is a need to service the debt, especially by the banking sector, Katsu said.

The sources of financing will be a mix of the National Welfare Fund and budget revenues, he said. Based on this mix the authorities will consider how, when and how much to borrow externally, Katsu added.

When asked whether Russia requested resources from the World Bank, Katsu said they were still in the phase of technical discussions.

Speaking about the World Banks further work in Russia, Katsu said cooperation with Russian regions would remain a priority for the World Bank in the future.

The crisis is but a brief interruption in the work we do with Russian regions. Regions need us and this is where long-term prospects are for us. In the short run, regions will be turning to us for cooperation, he said.

During the crisis, a detailed analysis should be to identify bottlenecks and areas where such efficiency and resource allocation could be improved, Katsu said.

The World Bank could also contribute to the countrys pension reform, he said.

Pension reform is another issue that has been under discussion in Russia for a rather long time. We hope that we will be able to contribute to possible solutions, he said.

Details of the World Banks future engagement in Russia could be announced within two months, Katsu indicated.

Over this period we intend to finalize our Country Partnership Strategy (CPS) Progress Report and submit it to the board, he said. We need to revise and update the strategy that was approved four years ago in order to reflect the countrys new needs and demands, he added.

Katsu will step down as World Bank Vice President for Europe and Central Asia in a month and his position will be taken over by French national Philippe Le Houerou, an economist by trade, who has been with the World Bank for more than 20 years, Katsu said. Le Houerou has previous experience in Russia, as he was the chief economist for Russia in 1992-1996, Katsu added.

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