Former Russian Finance Minister Alexei Kudrin criticized First Deputy Prime Minister Igor Shuvalov on Thursday for proposing an increase in budget spending for economic modernization.
“Unfortunately, today I heard from Shuvalov at a Sberbank lunch that it is necessary to increase spending on modernization. This is a mistake,” Kudrin said, at the opening of the St. Petersburg international economic forum.
“This does not mean that modernization should not be carried out. It’s simply that an absolutely wrong source for that mechanism has been proposed,” Kudrin said.
The Russian government should expect a serious economic crisis in the EU within the next twelve months, he said.
“We are fully involved in this process. We should not count on a good capital market. We have failed to create the prerequisites for solving certain structural problems,” he said.
In these conditions, Russia should tighten fiscal policy and accumulate reserves to solve its problems in the financial sector, Kudrin said.
Russia should prepare for the second wave of the global financial crisis by cutting some budget spending and following stringent budget rules, the president of the Russian Union of Industrialists and Entrepreneurs said on Thursday.
“The second wave of the crisis will be more difficult for Russia, first and foremost because we have spent quite a bit of the ‘fat’,” Alexander Shokhin said.
“So to avert such serious consequences we must not wait for the second wave to overwhelm us, as was the case in 2008.”
Unlike 2008, Russia can no longer rely on high oil prices, he added.