RSPP Commission Meeting on Banks and Banking

On 24 March 2011 A.L. Vedev, Director of Gaidar Institute Center of Structural Research, made a keynote address at the regular meeting of the RSPP Commission on Banks and Banking.

The meeting addressed the issue of “Macroeconomic Instability and Its Impact on the Banking Sector in Medium Term”.

In his presentation A. Vedev emphasized 3 most important parts: institutional assessment of the banking system and its role in Russian economy, quantitative evaluation of the banking system parameters until 2010 and budget deficit until 2020. The report analyzed the development of the banking system over the past 10 years: banking system assets went up from 37% of GDP in 2000 to 72.4% at the beginning of 2011, loans to non-financial sector over the decade surged from 18 to 40% of GDP, bank savings in Rubles grew 21 times over the period 2000–2009. The banking system has become a valuable agent of economic growth. In particular, the share of bank loans in GDP growth was 34% before the crisis against 15–20% in the early 2000's.

A. Vedev mentioned two sources of future economic growth: due to expanding domestic demand and increased consumption provided by investment growth. In his opinion, institutional constraints: relatively low level of competition, poor investment climate remain main obstacles for economic growth. Inflation is an associated factor of economic growth. A. Vedev proposed scenario of balanced development of both banking sector and financial markets. He submitted calculations on two scenarios of budget deficit: Inertia one – at the level of 2.5–4% and pessimistic one – at 5.5%.