The Institute of Contemporary Development hosted a roundtable discussion on “The Impact of the Financial Crisis on Russia’s Regions”.  INSOR’s expert community has been taking a long and close look at the global financial crisis and this discussion was led by Andrei Blokhin, an advisor to INSOR’s Social and Economic Development Department.  Mr. Blokhin noted that previous discussions have shown that despite the forecasts of economists and their warnings about changes ahead, for many this crisis turned out to be a big surprise.  Consequently, the response to the crisis has been chaotic.
 
The discussion focused on the specific impact this crisis is having on the regions, how to diagnosis this process and what deserves attention as a first priority.  Leonid Grigoriev, President of the Institute of Energy and Finance, stated that it remains to early to make a prognosis about how the crisis will develop.  The general direction in which it is moving will not be apparent until February or March of next year, Grigoriev suggested.  It terms of regional impact, he believes that much will depend of how the federal center reacts, in particular with regard to the Regional Assistance Concept and how federal funds are allocated among the regions.
 
Most participants of the roundtable agreed with Grigoriev’s theses.  However, Alexander Idrisov, managing partner at Strategy Partners, suggested that the main influencing factor will be the oil market:  “Everything will depend on the price of oil.”
 
Experts pointed out that many regions are already trying to independently adopt measures, including by developing their own dampening programs, anticrisis measures and new investment policies.  At the same time not all regions see the situation in the same light.  “The situation is worsened by the uncertainties in the macroeconomic prognosis as well as by the fact that certain regions have already adopted their budgets,” explained Maksim Reshetnikov, who oversees that department for monitoring and assessment of state policy for the Ministry of Regions.
 
However, despite the divergence of understanding and the varying levels of wealth among the regions, experts pointed out several general tendencies, namely that the region which send more money into the federal budget than they receive are being harder hit than the regions which are subsidized.  “The depth to which the conditions in the regions has reached will become apparent in the first quarter of 2009.  Usually in the first quarter the regions get by on the funds remaining from the previous year, but this year there won’t be anything left,” said Marina Klishina, First Deputy General Director for the Budget Relations Research Center.  According to Klishina many regions will begin 2009 without their budgets adopted and there is no clear understanding of which way things are headed: neither economists nor financial specialists can provide specific recommendations.
 
Concluding the discussion, Andrei Blokhin said that this was the first but by no means the last discussion focused on the situation in the regions.  In the near future INSOR plans on holding a discussion of “The Impact of the Financial Crisis on Regional Policy” with the participation of governors and key ministerial and departmental heads.