20 Oct 2010 17:21

Sluggish investment demand threatens 2011 budget implementation - Stepashin

MOSCOW. Oct 20 (Interfax) - The insufficient pace of recovery in demand for investment in the Russian economy is a macroeconomic risk that may affect budget implementation in 2011, Audit Chamber chief Sergei Stepashin said.

"When budget spending on investment is falling in real terms, 10% growth in investment is to be provided by the investment programs of the state-controlled infrastructure companies. However, that resource is limited, since these programs are financed mainly by raising tariffs on goods and services," Stepashin said in the State Duma during an examination of the 2011-2013 budget.

Despite an upward trend in investment demand, in recent months it has been insufficient to ensure steady recovery of the economy. The situation in the housing construction sector is especially difficult, he said.

Stepashin said "no essential progress" in bank lending to the economy is discernible. He cited Central Bank data that the weighted-average interest rate on loans to non-financial organizations declined 33% in the course of the year, to 10% in August 2010. However, lending rose by less than 6% in that period.

"The low lending activity is because the economy itself is not generating sufficient demand for borrowed capital," Stepashin said.

One of the main macroeconomic risks for the Russian budget is overreliance on raw materials export, and the problem of a significant increase in the amount of state debt. Debt servicing costs will exceed 600 billion rubles in 2013, more than will be spent on education and healthcare, he said.