17 Dec 2014 13:16

Investment in 2015 may decline at 2009 pace, as much as 10% - Klepach

MOSCOW. Dec 17 (Interfax) - The decline in investment in 2015 will be in the range 1.5%-10% according to various forecasts, Vnesheconombank (VEB) Deputy CEO and former deputy Economic Development minister Andrei Klepach said.

The Central Bank may continue to raise interest rates, so a separate channel for getting money to enterprises needs to be organized, he said. Otherwise, a serious drop in investment is inevitable as soon as the first quarter of 2015.

"In 2015, taking official forecasts, the decline in investment will range from 1.5% to the Central Bank's pessimistic forecast, which it made recently, up to 10%. As a matter of fact, the reality will be somewhere between those two figures: a minimum of 1.5%-2% and a maximum, this may perhaps be up to 10%, which matches the decline we had in 2009," Klepach said at conference on Russia in the WTO organized by the newspaper Vedomosti.

Given the current ruble devaluation and high interest rates "lending will come to a standstill for a time; at 20% and higher interest, there is little point in talking about any serious investment projects," he said.

"In essence we are once again in the situation we were at the beginning of 2009, when simply in order to start up facilities that were close to completion, enterprises borrowed at 19-20-plus percent interest and as a result to this day have not recovered from the debt burden accumulated then. We are facing the same risks today," Klepach said.

"In essence, a separate channel for offering long money to enterprises needs to be organized," he said. Certain steps in that direction were made in the form of plans for project co-financing, but that mechanism is still not operational: numerous barriers have appeared and it is tied to the Central Bank's key rate. "I think the key rate of 17% will get even higher in the near future," he said.

"In these circumstances, it means that we need to have other instruments, and in principle it is clear what they are. At one point National Welfare Fund (NWF) money was provided in the form of subordinated loans at 8% and then 6% interest. There could be a sort of base rate, that is not tied to the current situation, but rather to the fact this is a national resource and it should, despite everything taking place with the ruble and inflation, really be no higher than 5%-6%," Klepach said.

Unless "unorthodox methods for cash offers" are used, there could be a serious decline in investment and consumer demand in the first quarter next year.

"For that reason, the most realistic scenario is a scenario of decline in 2015. The economic decline could equal from 1.2% to 4.6% under the Central Bank's pessimistic scenario," Klepach said.