OREANDA-NEWS. Vladimir Putin held a meeting on measures for ensuring the Russian economy’s stable growth.

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PRESIDENT OF RUSSIA VLADIMIR PUTIN: Good afternoon, colleagues,

As agreed, we are here today to discuss the Russian economy’s short-term development outlook. I expect to hear concrete proposals on measures that will help us to ensure stable economic growth, give ourselves maximum protection against fluctuations in the global economy, reduce the risks of downturns in production in key sectors, and stimulate business activity.

I remind you that at our meeting at the start of this year we noted the worrying trends in the global economy that we observed in the second half of 2012. As we can see, these trends continue now. This was something I discussed last week when I met with the Prime Minister, and it’s something we talked about in some detail yesterday too. Today, I would like to hear from the experts and the Government members.

I remind you that the Eurozone economy shrank by 0.6 percentage points in 2012. Some of the Eurozone countries are in a difficult situation with their debt commitments. True, there have been some positive signals here of late, but the situation remains complicated nevertheless. We see the solutions being used to resolve the debt problems in particular countries, Cyprus, for example, where the chosen measures are essentially undermining confidence in the financial system. The experts cannot say for certain how these kinds of extraordinary measures will affect further developments in Europe and what long-term consequences they might produce.

Unfortunately, negative trends are continuing in the Asia-Pacific region too, which had been showing robust growth despite the problems in the global economy. The Japanese government is taking vigorous measures to revive its national economy, above all by unprecedented increases in money supply. There has been a bit of a slowdown in growth rates in China.

The situation is complicated in the United States. The analysts are quite optimistic in their forecasts. The USA has made some big spending cuts, but we cannot say with certainty yet just what effect this will have on the US economy. The IMF revised its latest US GDP growth forecast downward by 0.2 percent, and also revised its global growth forecast downwards from 3.5 to 3.3 percent.

We must be prepared for the effects that a drop in production and crisis signs in the global financial system could have on our economy. Some of these effects are already making themselves felt, as we can see. Our economy grew by 3.4 percent last year, but this was largely the result of a good start in the first half of the year. Economic growth started slowing down in the second half, above all due to a drop in export demand.

Furthermore, lack of business confidence has led to more capital flowing abroad and a drop in investment activity. The slowdown is reflected in most of the macroeconomic indicators. The first quarter results show that industrial output stopped growing and exports were down by 4.5 percent. Unemployment rose slightly at the start of the year. The increase is slight, but nonetheless there, though, fortunately, unemployment remains at a record low.

GDP growth in the first quarter of 2012 came to 4.8 percent, while in the fourth quarter it was 2.1 percent. For the first quarter of 2013 it was only 1.1 percent. The Economic Development Ministry has revised its economic growth forecast for 2013 downwards to 2.4 percent, but this is with energy prices still high. Let me bring to your attention that a growth rate of 2.4 percent is lower than the global economy’s growth rate. It’s been a long time since we were last in this situation.

I stress again that these are all worrying symptoms. At the same time, I do not want to overdramatize things. Russia’s economy is still quite solid overall. Global markets are increasingly volatile, but oil and other commodity prices remain quite high. Russia has substantial gold and currency reserves, and the budget reserve funds provide us with a safety cushion. What is also very important is that people’s real incomes are not falling, thank goodness, but continue to grow, slowly, yes, but they are growing nonetheless.

There are positive economic indicators too. Industrial output was not growing at all at the start of the year, but year-on-year growth for March showed an increase by 2.6 percent. Many analysts think that economic growth should pick up again in the second quarter. It is important today to decide what we can do to stimulate this process and boost our economic actors’ confidence.

Some decisions, above all medium-term measures, have already been taken, including measures to improve the investment climate and develop the financial market. These measures must all be implemented within the deadlines.

I repeat again that we need to do everything we can to ensure our economy’s stable development. We need a package of measures to stimulate economic growth. In this respect I note the following important points.

First, many people propose revving up economic growth through budget spending alone and changing the budget rules to make this possible. It is clear however, that budget measures alone are not enough to resolve the tasks before us, and if we change the budget rules we would have some risks to face. All of you here are well aware of the risks involved. I would like to hear views on this matter.

Second is the question of infrastructure development, above all in the transport and energy sectors. We have already discussed before how the lack of infrastructure creates big obstacles that hinder faster economic growth.

There is often not enough long money for infrastructure development projects. I gave the instruction at one point to examine the possibility of long-term investments using funds from the National Welfare Fund. The Government agreed with this idea and was to take the according measures and propose the needed mechanisms. I would like to hear from you today on what has been done here.

Third, the current slowdown in economic growth raises the risk that regional budget revenue will be less than was planned. We discussed this just recently and examined the problem in detail during a meeting in one of the regions. We were looking at the effects this would have on the work to resettle people from dilapidated housing, but we discussed the issue of budget revenue in general too. This situation raises the question of the regions’ ability to meet their spending commitments, above all in the social sector. This is something we should look at too, today. I expect to hear your proposals on this issue, your ideas on how we can meet the spending commitments – and I make it clear that these commitments remain in force and no one is going to annul them – without undermining the regions’ economic and financial situation.