25 Nov 2009 11:55

Effects of crisis will take another 1-2 yrs to

MOSCOW. Nov 25 (Interfax) - The "bubble" of problems that accumulated in the economy prior to the onset of the global financial crisis will "work themselves out" over the course of another one-two years, Deputy Prime Minister and Finance Minister Alexei Kudrin said at a conference organized by the business daily Vedomosti.

"The bubble is slowly working itself out, but the process has not been completed yet. We will overcome the effects of the crisis in one-two years," Kudrin said.

"I mean that the bubble is still clearing away, that the working out of the problems that accumulated prior to the crisis is still underway," he said. Attempts to support demand using state methods, using the instruments of the Central Bank and the government "is holding back the clearing away of the bubble," although he conceded that all those moves prevented a deeper crisis.

The decline in the construction and retail sectors will be difficult to overcome, he said. Lending volumes are also a cause for concern, Kudrin said. Lending rose 50% in 2007. "The question is whether that amount will be returned," he said. So far not all bad loans have surfaced, "since they are working on them; a portion is being restructured."

"The bubble is slowly working itself out, but it hasn't finished yet, it's not even close to finishing," he said.

Despite the shift from economic decline to recovery, problems remain with bank balance sheets, with industry, and with employment. Mending those problems will be "slow and painful," he said.

"I don't believe those problems have been resolved, in Russia or anywhere else," he said.