Putin basks in robust Russia growth but clouds remain
2012-01-13 11:06:28
Prime Minister Vladimir Putin boasted Thursday Russia was one of the world's three best-performing major economies with growth of 4.2 percent in 2011 but warned of a tougher 2012 and the need for reforms.
The central bank also revealed that Russia suffered net capital outflows of over $84 billion in 2011 and Putin acknowledged in an election manifesto also published Thursday that it must change its outdated Soviet-era economic model.
"Russia is in third place among the major economies of the world, behind only China and India," Putin told a cabinet meeting broadcast on state television. Growth was 4.0 percent in 2010.
Russia's economy has been helped over the last year by relatively high oil prices and cautious fiscal policies which have spared it the budget crises endured by several of its eurozone partners.
Putin also said Russia had a budget surplus of 0.8 percent of Gross Domestic Product in 2011, making it one of very few larger economies not to be in deficit.
Industrial production growth at 4.7 percent was the fourth best worldwide after China, India and Germany while 2011 inflation was 6.1 percent, the lowest level since the fall of the Soviet Union.
He said the country's foreign currency and gold reserves were still high at over $500 billion, the third highest in the world after China and Japan.
But Putin -- who is seeking to reclaim the Kremlin in 2012 polls after his four-year stint as prime minister -- warned that this year would be tougher for the economy due to the external situation.
"The worrying signals that we are getting from the world's leading economies should make us work very seriously to ensure the interests of our citizens," he said.
In more good news, the Association of European Businesses (AEB) said sales of cars in Russia rose by 39 percent in 2011 to over 2.65 million vehicles as the market bounced back from the last economic crisis.
The rosy macro-economic and corporate data contrasted with troubling figures showing the extent of capital outflows from Russia as domestic political turbulence and the global economic slowdown rattled investors.
The net private sector capital outflow was $84.2 billion, considerably worse than the $33.6 billion leaving the country in 2010 as Russia recovered from the global economic crisis, the central bank said.
The figures are considerably worse than Russia expected for 2011. Even in July, the Kremlin was predicting net outflows of just $35 billion.
Economists have long criticised Putin for failing to implement reforms to encourage private business and end corruption that would help lead to the injection of more foreign capital into the country.
But in his election manifesto for the March 4 presidential polls, Putin picked up the mantra of outgoing president Dmitry Medvedev on the need to modernise the economy to wean Russia off its dependence on oil and gas exports.
"The model of economic growth for the last decade -- based on high oil prices and wasted capacities that was built back in the USSR -- has exhausted itself," said Putin.
Putin said that one of the biggest challenges facing Russia was to reverse its weak labour productivity which he admitted was two-to-three times lower than other leading economies.
He set a target of creating 25 million new jobs in the next 20 years and said all sectors of industry had to be put on a new "technological level" while encouraging new activity in areas like telecoms and biotechnology.
"Russia is changing and is becoming a country where it is comfortable to live and bring up children and grandchildren, where a citizen can realise himself and his dream," said Putin.