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Putin Says More Needs to Be Done to Stabilize Economy
World Economy

Putin Says More Needs to Be Done to Stabilize Economy

Russian President Vladimir Putin praised the “stabilization” of the Russian economy Wednesday but said more can be done to promote growth.

Russia’s economy contracted by 3.7% last year on the back of western sanctions and a slump in the price of its oil exports. It has stabilized somewhat since then thanks to a rebound in energy markets, but remains weak, ABC reported.

Speaking to Russian and foreign business leaders in Moscow, Putin praised drops in inflation and capital outflows but said “the stabilization that has been achieved has not yet transformed into steady growth.”

Putin added that Russia still needs to increase labor productivity and limit government spending.

He stressed that a 3% budget deficit this year was acceptable, adding that it needs to stick to its inflation goal and added that the overall trend is for interest rates to fall.

He added that officials understand that economic growth will not start automatically, later telling the audience that the central bank should clean up the banking system carefully.

The economy entered recession last year amid a global slump in oil prices and Western economic sanctions that were imposed on the country for its annexation of Crimea in early 2014 and the alleged role in a pro-Russian uprising in eastern Ukraine.

However, the International Monetary Fund predicted in its latest World Economic Outlook in October that Russia’s economy could return to growth in 2017 and that its recession had been shallower than expected. It forecast a contraction in Russian GDP of 0.8% this year but growth of 1.1% in 2017.

Earlier Wednesday, two leading ministers disagreed publicly on possible privatizations. Finance Minister Anton Siluanov saying only “modest plans” were in place for the period through 2019, while Economic Development Minister Alexei Ulyukaev said selling parts of government stakes in the VTB bank and the Russian Helicopters company was possible and would be attractive for investors.

The dispute comes days after the planned privatization of a majority government stake in oil producer Bashneft led to the government approving the sale to larger oil firm Rosneft, which is itself majority state-owned. The deal, worth over $5 billion, was defended Wednesday by Putin, who said that because Rosneft has minority foreign investors, it was not simply a transfer of assets from one part of the state to another.

 

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