Putin touts stabilized economy

But more work needed to stimulate growth, Russian says

Speaking Wednesday at a business forum in Moscow, Russian President Vladimir Putin said economic stabilization has “not yet transformed into steady growth.”
Speaking Wednesday at a business forum in Moscow, Russian President Vladimir Putin said economic stabilization has “not yet transformed into steady growth.”

MOSCOW -- Russian President Vladimir Putin on Wednesday praised the "stabilization" of the Russian economy but said more can be done to promote growth.

Russia's economy contracted by 3.7 percent last year on the back of Western sanctions and a slump in the price of its oil exports. The economy has stabilized somewhat since then thanks to a rebound in energy markets, but it remains weak -- the International Monetary Fund predicts a contraction of 0.8 percent this year before growth of 1.1 percent in 2017.

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.

Earlier Wednesday, two leading ministers disagreed publicly on possible privatizations. Finance Minister Anton Siluanov said only "modest plans" were in place for the period through 2019, while Economic Development Minister Alexei Ulyukaev said that 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 company Rosneft, which is itself a majority state-owned company. The deal, worth more than $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.

OPEC's top official on Wednesday talked up Russia's commitment to joining efforts to limit oil production even as the group's internal disagreements over how to share the burden of cuts stood in the way of a global deal.

"We are confident of Russia's commitments," OPEC Secretary-General Mohammed Barkindo said in an interview with Bloomberg television in Istanbul. Although it's still too early to assign countries individual output targets, Barkindo said "momentum is on our side," adding he's "very optimistic" that nonmembers will join a deal to reduce output.

Russia's two largest oil producers said Tuesday that they would comply with any government instructions to curb oil output, after Putin on Monday announced his support for a supply deal with OPEC. That leaves the success or failure of an accord involving producers of half the world's oil in the hands of an OPEC committee, which will meet in November to resolve disputes over how much Venezuela and Iraq should pump.

Russia's central bank governor, Elvira Nabiullina, said this week that she is growing more confident that oil will again be the nation's strongest asset.

The Bank of Russia, which last month issued an unprecedented commitment to leave borrowing costs unchanged the rest of the year, will face an easier path to interest-rate cuts if oil prices rise further, Nabiullina said Tuesday in a Bloomberg Television interview in Moscow. While Brent crude has almost doubled from a 12-year low in January, the central bank's "moderately tight" stance allowed for only two reductions in 2016 before policymakers all but shut the door on more monetary easing this year.

"If there is a higher oil price, then it can lead to a stronger ruble, and -- through the foreign-exchange channel -- that in turn can cause a more rapid decline in inflation expectations, slowing inflation," Nabiullina said. "Then we can ease monetary policy much faster."

Information for this article was contributed by staff members of The Associated Press and by Grant Smith, Angelina Rascouet, Yousef Gamal El-Din and Nejra Cehic of Bloomberg News.

Business on 10/13/2016

Upcoming Events