Russia to continue on economic course despite restrictions, says Putin
October 3, 2014 Alexei Lossan, RBTH
Speaking at the ''Russia Calling'' Investment Forum, Russian President
Vladimir Putin discussed the main direction in the development of
Russia's economy. Analysts believe that Russia's main challenge will be
keeping inflation under control - inflation that was partly brought
about by the ban on food
imports from the EU and the US.
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Russia to continue on economic course despite restrictions, says Putin
President Vladimir Putin attending the 6th Annual VTB Capital Investment
Forum "Russia Calling" at the World Trade Center in Moscow, Oct. 2.
Source: Alexei Druzhinin / RIA Novosti
Source: Russia Beyond the Headlines - http://rbth.com/business/2014/10/03/russia_to_continue_on_economic_course_despite_restrictions_says_puti_40347.html)
Source: Russia Beyond the Headlines - http://rbth.com/business/2014/10/03/russia_to_continue_on_economic_course_despite_restrictions_says_puti_40347.html)
Russia will continue expanding its cooperation with the BRICS countries, but will also maintain relations with the European Union, announced Russian President Vladimir Putin during the Russia Calling Investment Forum in Moscow on Oct. 2, organized by VTB Capital.
"We share the principles of the WTO (World Trade Organization), unlike
some of the organization's founding fathers, and we will strive to
develop Russia as an open market economy and will consistently solve the
challenges set before us. The external restrictors only strengthen our
decisiveness," said Putin.
The sanctions war and the role of the WTO
The sanctions war and the role of the WTO
According to Putin, the government's fundamental aim will be to balance
Russia’s budget policy, and this year's events have only convinced the
country's leadership of the rightness of its chosen course.
In particular, Russia will remain faithful to the budget rule according
to which a part of the surplus profit from oil sales is moved into
special funds: the Reserve Fund and the National Wealth Fund.
The general resource volume of these funds has already exceeded nine
percent of Russia's GDP.
Principal strategies
However, Putin admitted for the first time that Russia's inflation has
gone beyond planned limits and reached 7.6 percent, mainly because of
the price increase on foodstuffs, a result of the ban on food imports
from countries that have imposed sanctions on Russia over its
involvement in the Ukrainian crisis.
But Putin also said that monetary inflation had remained at five
percent. “We have not augmented the fiscal burden and do not intend to
introduce restrictions on the movement of capital," he said.
"The fundamental factors creating stability in Russia's economy are a
non-deficit budget, balance of payments, as well as the Bank of Russia's
decision to place the ruble on a free-floating regime."
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Putin said that in the near future Russia will expand its relations with
the Latin American countries and other members of the BRICS group
(Brazil, Russia, India, China, South Africa) and it was as part of this
policy that a record contract was signed in 2014 to supply gas to China.
The creation of infrastructure for this project will be one of the most
important building projects in the world, according to Putin.
Russian companies plan to carry out the projects with their key partners
using national currencies. Gazprom Neft has already supplied the first
installment of oil to China in return for payment in rubles.
Putin said that Russia will stimulate the creation of regional
integrated associations, but will continue its work within the WTO
framework and its collaboration with its biggest trading partner, the
EU.
A host of problems
Russia's Central Bank Governor Elvira Nabiullina announced during the
forum that the economic slowdown in Russia first and foremost bears a
structural character, while the expectation of high inflation is leading
to a growth in interest rates.
For this reasons, one of the Central Bank's main future objectives will
be to target inflation and reduce the growth of prices. According to
Nabiullina, in 2014 Russia's inflation will be almost eight percent;
however, in the near future the Russian government is targeting a
reduction to four percent.
High inflation is not the only problem with Russia's economy, however,
as Russian Finance Minister Anton Siluanov pointed out: "On the one
hand, geopolitical risks influenced investment expectations, on the
other hand, oil prices began to fall," he said. "While in the first half
of 2014, the price of Brent oil was $101 a barrel, now it is almost
$91."
No recession for Russian economy in 2014, says World Bank study
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In such a situation, according to Siluanov, the government decided not
to accumulate the volume of costs and not to stimulate an artificial
economy, since that would have led to a growth of inflation.
"We also did not increase taxes, but rather began to restructure costs,"
he said, adding that part of the savings would be directed toward
infrastructure, in particular, the development of Moscow’s aviation hub
and the realization of projects in the Far East.
However, German Gref, the former minister of economic development and
now president of Sberbank, Russia's largest bank, was against the
decisions proposed by the government, arguing that the Central Bank's
targeting of inflation is not an effective measure and the real rise in
prices is substantially greater.
The former minister believes that the main problems with the Russian
economy are the low quality of government regulation and the flow of
capital abroad. Gref also spoke out against the ban on food imports from
countries that have imposed sanctions on Russia, as well as the
government's plan to substitute imports.
"We need to radically increase the quality of regulation, as well as
force private companies to be more competitive," said Gref. "For now it
is impossible, though: Half of our economy is monopolized."
R
Source: Russia Beyond the Headlines - http://rbth.com/business/2014/10/03/russia_to_continue_on_economic_course_despite_restrictions_says_puti_40347.html)
Source: Russia Beyond the Headlines - http://rbth.com/business/2014/10/03/russia_to_continue_on_economic_course_despite_restrictions_says_puti_40347.html)