Video screens display President Vladimir Putin speaking during his annual press conference in Moscow while journalists hold the name of their media, on December 23.
Video screens display President Vladimir Putin speaking during his annual press conference in Moscow while journalists hold the name of their media, on December 23.

Putin Says Russia Economy Needs High-Tech Path

Russia has no plans to isolate itself from the world and should be part of the global economy

Putin Says Russia Economy Needs High-Tech Path

President Vladimir Putin said Russia’s economy is returning to growth and there are signs that real wages are improving as the country emerges from its longest recession this century.
While “of course” economic difficulties remain, a “positive trend has emerged, and in recent months we observe very modest, but still growth in real wages in the real sector of the economy,” Putin said Friday at his annual televised press conference. “That inspires a certain confidence that the movement will be positive in the near term,” news outlets reported.
Russia’s economic contraction is slowing, capital flight is fading and real wages are starting to recover, he said.
Gross domestic product will likely shrink by 0.5% to 0.6% in 2016, rather than a previously forecast 1%, while the budget deficit will be 3.7% this year and is “absolutely acceptable,” Putin said. Some areas of the economy have already resumed growth and there’s “serious” expansion in agriculture of at least 4% this year, with the grain harvest expected to exceed 119 million tons, he said.
The world’s largest energy exporter is clawing its way out of a second year of recession. The Bank of Russia forecasts a return to growth in 2017, though it’s warned the economy won’t expand more than 2% in coming years without structural reforms.
After the recession plunged millions of people into poverty, consumer spending is stagnant even as the ruble has rallied and inflation continues to decelerate toward the central bank’s 4% target by the end of 2017.

  Part of Global Economy
Russia has no plans to isolate itself from the world and should be part of the global economy, Putin said.
Russia has all chances for keeping its global leadership in certain areas of industry and becoming one of the leading countries in manufacturing high-tech products, Sputnik quoted Putin as saying.
“We have all reasons to believe that we will keep our leadership in key areas for many decades to come. And of course we proceed from that we must fit in the trend of switching to a new technological revolution. We have all chances for that, taking into account a high level of our science and education,” the president said.
Putin added that over last years, Russia’s export has grown “practically from zero” to $7 billion. Among the areas of industry, where Russia traditionally remains a leader, the president named nuclear technologies, aerospace industry and defense industry complex.
Moreover, Russian economy will not isolate itself and will become a high-technology based economy, the president added. “We are not going to isolate ourselves. If the Russian economy wants to grow–and it does and will grow by pursuing the path of high technology–it must stay part of the world economy, which it will,” Putin said.

  Income Tax
It doesn’t make sense now to replace Russia’s flat 13% personal income tax with a system of progressive rates because it “will lead to tax evasion and budget income will be reduced,” Putin said. While he’d been very skeptical when the flat tax was introduced in 2001, budget income rose seven-fold which allowed for social spending, Bloomberg reported.
The 2016 budget deficit is the widest since 2010 and Finance Minister Anton Siluanov has said any windfall from higher oil prices should be used at least partly to replenish reserves. The government, which relies on energy for 38% of budget revenue, has based 2017-2019 spending plans on oil at $40 per barrel.
Russia’s Urals export blend usually trades at a discount to Brent, which was held above $50 per barrel after Russia this month joined with the Organization of Petroleum Exporting Countries and 10 other non-OPEC states in a pact to curb production in the first half of next year. The government may get as much as an extra 1 trillion rubles ($16 billion) with oil at $50 in 2017, Siluanov said earlier this month.

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