A second wave of economic crisis is unlikely in Russia but the country is braced for a long period of recovery after the global financial meltdown, a senior Central Bank official said on Wednesday. Russia, which receives a large share of its revenue from oil exports and was hit hard by the global financial and economic crisis, started to exit its recession from the third quarter of 2009 following a recovery on international commodity markets and the government's anti-crisis measures to prop up the national economy and restore consumer demand.
"There will be a long period of volatility, instability and fluctuations on financial and money markets, in budgets and growth factors," Alexei Ulyukayev, first deputy chairman of the Russian Central Bank, said in an interview with Izvestia daily as he spoke about common problems for the global economy. Ulyukayev said strong volatility in commodity prices, stock indexes and foreign exchange rates were the result of the failure of the global financial system to solve some fundamental problems, primarily, huge budget deficits.
"The fundamental reason for that is the aging of global population, which provokes constant growth in budget expenditures and obligations in the pension system and health care," Ulyukayev said. The banker said it was obvious that both the pension age and the workforce replacement ratio had to be increased to match new realities, adding though that such plans in the European Union had already caused a wave of strikes, making the financial system hostage to politics.
In this situation, international investors are losing confidence in sovereign bonds as a safe haven and this factor generates big risks for the global financial system, he said. Domestically, Ulyukayev said the Russian government was already curtailing anti-crisis measures, acting cautiously to stimulate economic growth while guarding against new financial bubbles.