Another version of development
Martin Gilman the head of the HSE Centre for advanced studies comments on the Russian economy nearest prospective. According to Gilman, domestic producers are to benefit from the crisis.
The 1998 devaluation drove up prices for foreign goods, making domestic production "much more competitive," said Martin Gilman, the HSE professor, a former representative of the International Monetary Fund to Russia.
"Just about any company that was producing goods for the domestic market benefited," he said. "Food producers, automakers, clothing, light goods -- they all made money."
The higher standard of living achieved in the last decade has also made the devaluation less likely to fuel a recovery this time around. Labor costs in Russia are now far greater than in China, for example, making Asian imports competitive even with the weakened currency.
Nonetheless, there have been spots of hope. Gilman said he'd seen an investment bank's internal memo predicting plummeting imports in January, which could help domestic producers if it represents a turn to Russian products.
"The exchange rate is making foreign goods more expensive, so a shift to domestic goods seems like the next logical step," he said, pointing to the processed-food sector as one area where a cheaper ruble would play a particularly favorable role.
"We should start seeing the true impact of devaluation in February and March," Gilman said.
Martin Gilman for the Moscow Times.
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