Two senior Russian officials warned political leaders on Thursday against rushing into more spending to stimulate a struggling economy at the risk of higher inflation.
Russia's $2.1 trln economy expanded by just 1.1% in the first quarter, significantly below the Kremlin's target of 5%, prompting President Vladimir Putin to urge the government to boost social spending and aid ebbing growth.
Officials and analysts have laid into the central bank this year for placing too much emphasis on inflation over growth and Prime Minister Dmitry Medvedev has said the government will consider stimulus to avert recession.
But Elvira Nabiullina, soon to take over as head of the central bank, said that continuing the steady reduction of inflation remains the priority, while First Deputy Prime Minister Igor Shuvalov said that hasty moves to boost growth by spending were wrong and dangerous.
"I am against boosting economic growth at the expense of … inflation," said Nabiullina, a 49-year-old former economy minister who will replace bank chief Sergei Ignatyev in June.
Shuvalov, speaking at the Sberbank Investment Forum, said that the government should approach the slowing expansion of the economy judicially.
"The most important (thing) is not to descend into a discussion of any fiscal measure to tweak the situation artificially to show that our growth rate starts changing dramatically," Shuvalov said.
"Should the government do something hastily? I think that there should not be any hasty reaction, because it is erroneous and dangerous."
Both Nabiullina and Shuvalov said that the economy was performing below its potential, but Shuvalov said the country was not facing a recession.
"What there is, is a dissatisfaction with the pace of economic growth," he said.
Like most major emerging economies, Russia has to grow faster than its peers in the developed world to keep unemployment low and households prosperous and 1% growth compares to trend rates of between 5 and 10% over the past decade.
Bankers say a softening of monetary policy would spur lending to industry and increase its output.
"I expect a rate cut, but not related with the arrival of a new head," German Gref, chief executive of Russia's largest bank Sberbank, said at the forum earlier in the day, adding that he sees inflation easing soon.
Russian inflation is still relatively high, at 7.1% in mid-April compared to the central bank's target of 6% by the end of 2013 and its base interest rate of 5.5%.
