External shocks do not pose a threat to Russia, but the crisis will last a long time and economic growth will be slow, a senior Central Bank official said.

“I do not see any deterioration of the Russian economy in the near future due to external shocks, but the crisis will be long, and I think that it is not worth counting on the possibility of the model of growth that we experienced in the first decade of this century, Central Bank deputy chairman Sergei Shvetsov said at the Federal Investment Forum in Moscow.

Economic growth will be modest, inflation will be lower, and Russia has yet to adapt to low inflation, he said. In this environment, “it will be more difficult to make money,” Shvetsov said.

He said the Russian economy will be affected by events in Europe and the United States. This particularly concerns the narrowing of foreign borrowing markets for the Russian economy. This will have a dual effect.

On one hand, the situation with external corporate debt will become more balanced, the currency risk will gradually recede from the Russian economy. “More and more banks will look to domestic savings and Central Bank refinancing, rather than to foreign loans,” Shvetsov said.

On the other hand, major Russian companies that traditionally borrow on the western market will no longer receive the required amount of financing and will turn to borrowing on the domestic market. Banks, accordingly, will lend to these large companies, but liquidity in the banking sector is limited and the return of major borrowers to the domestic market could limit access to credit resources for small and medium businesses, Shvetsov said.

“The accessibility of credit resources for small and medium enterprises will decline, not in volume, but in terms of rising interest rates. This will affect economic growth,” Shvetsov said, adding that the job of the Central Bank and the Finance Ministry is to support bank liquidity.

In addition, Russia is part of the global economy, and global events have an impact on the country, he said.

Commenting on the latest events in the global economy, Shvetsov mentioned the sovereign debt problems in Europe, particularly Greece, which is “a glaring example, built not only on unbridled borrowing, but also on falsification of re-porting.” Banks to a large degree facilitated Greece’s avoidance of accurate disclosure of borrowing statistics, he added.

“Greece’s problem is not that its sovereign debt is 160% of GDP, and if it will be 120% then everything will be okay. It won’t be okay, measures are need to increase competitiveness. This will be accompanied by a decline in living standards, among other things,” Shvetsov said.

Increasing the amount of support will not resolve the problems, he added. “The problem of an alcoholic is not that he does not have money to buy a bottle and that’s why he’s ill, the problem is that he drinks,” Shvetsov said.

He said the Central Bank does not believe that we are now experiencing a crisis that differs from the crisis of 2008.

“To a certain degree, a large part of stability is psychology,” he said. The measures taken in 2008 did a great deal to help restore confidence in the financial system and restore financing mechanisms, he said.

“The 2008 crisis showed that not only the confidence was destroyed with the collapse of the mortgage market, but something more: the very mechanism built on consumption by some countries at the expense of investment from other countries exhausted itself,” Shvetsov said.

Deputy Finance Minister Alexei Savatyugin said that now, unlike in the 2008 crisis, the whole world’s attention is focused on the sovereign debt problem in Europe.

“Now, unlike what happened three years ago, all the world’s attention is riveted on Greece, as three thousand years ago Greece was also the center of everything,” Savatyugin said.

He said a catastrophic scenario would be a combination of such factors as a sovereign budget crisis among Eurozone countries, a drop in oil prices, and a slump on the stock markets.

Savatyugin said that if oil prices dropped to $90 per barrel Russia would not require additional measures to support the economy and would get by with existing mechanisms, but additional measures might be needed if the oil price falls to $60-$70.

“We realize that if there is an unfavorable development of the situation, that is a drop to $70, perhaps even to $60, then we might require special measures for additional capitalization of systemically important companies, both in the real sector and in financial infrastructure,” Savatyugin said.