The International Monetary Fund (IMF) said on Tuesday it expected Russia's economy to expand in 2010 after a contraction last year, but warned the government it should start reducing budget spending and launch long-awaited structural reforms.
The fund said it expected Russia's economic growth to resume in 2010 and reach 4.25 percent after a 7.9 percent fall in 2009. It noted quickly falling inflation rates, the recovery of current and capital accounts and the strengthening of the ruble exchange rate.
But it said that the situation in the banking industry was still tense, and financial markets remained vulnerable.
The government's priority task should be scaling down measures to stimulate the economy with the help of budget funds and implementing structural reforms aimed at raising economic growth rates, the fund said.
The head of the IMF mission in Russia, Paul Thomsen, said he was worried about possible budget problems as the government had spent about 10 percent of GDP to cushion the effect of the global crisis.
The government will have to abandon these measures when private sector demand is normalized but about three-quarters of the measures were permanent, like pensions, and the government will have to look for ways of cutting spending in other areas.
Russia's discretionary spending, unlike spending set by the law, amounted to just nine percent of GDP.
Thomsen said that meant that the government cannot abandon spending unless it implemented reforms in state-owned industries to help it save money for social welfare.
MOSCOW, August 3 (RIA Novosti)
