BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/29
On the monetary policy side, the IMF noted that the Central Bank of Russia could proceed with gradual easing as inflation risks subside, but should proceed prudently.
Among its recommendations for the banking system, the IMF would like to see enhancements in stress testing of banks, a review of banks’ asset quality, as well as further development of banking supervision and bank regulation. In particular, the operations of state development bank VEB deserve improvement. The IMF estimates that capital support needed to prop up the Russian banking system could reach 0.5−1 % of GDP at oil prices broadly around $50 a barrel. If the oil price falls to $20−$30 a barrel, it could push, according to IMF stress tests, that requirement to 4.5 % of GDP. In addition, the support needed for VEB could reach 2 % of GDP in coming years.
The IMF repeated its call that structural reforms are inevitable to support future growth and encouraged e.g. to reduce unwarranted administrative pressures on businesses, strengthen property protections, improve education and sustain infrastructure investment.
Russian authorities were largely in agreement with the IMF when it comes to balancing budgets, pension system reforms and the importance of structural reforms.