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Dmitry Medvedev: Government to take risk of making breakthrough; status quo leads to abyss

September 27, 2013, 5:03 UTC+3

Prime Minister believes that the public sector of the economy should be smaller but more efficient

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MOSCOW, September 27 (Itar-Tass) - A weak economic growth of no more than 2 percent a year in Russia puts the government at a crossroads and requires it to take risky measures to overcome the crisis and ensure steady development, Prime Minister Dmitry Medvedev said.

“We are basically at a crossroads. Russia can continue moving very slowly with an economic growth close to zero or it can take a serious step forward,” Medvedev said in an article published by the financial daily Vedomosti on Friday, September 27. “The latter option is associated with risks, but the first scenario, with an ostensible possibility of preserving the attained level of prosperity, is even more dangerous as it leads directly to the loss of this prosperity. This is a road to the abyss.”

“Economic development forecasts are quite pessimistic: the GDP growth this year will most likely stay under 2 percent,” he said, noting that “a rigid budget rule is needed in order to fulfill all social obligations of the state, but in the future it will make it impossible to rely entirely on public demand.”

“This is why it is critically important to create lasting sources of sustainable economic growth in the non-public sector of the economy,” the prime minister said.

He stressed the need to improve the business environment, mobilise domestic capital and attract foreign investments on a large scale, upgrade the economy and pursue a new policy on the labour market.

Medvedev believes that the public sector of the economy should be smaller but more efficient. “Against the background of economic slowdown, we must make sure that the state does not keep an unjustifiably large presence in the economy and the government does not create excessive obstacles for entrepreneurial activities,” he said.

In his opinion, “government agencies should focus on performing their main functions and hire private organisations to perform other functions or withdraw completely from such spheres, while continuing to make their own work more transparent and accountable to society.”

“Our long-term goal is to build a smaller and decentralised but most efficient public sector,” he said. “A situation where labour productivity and investment returns in it [public sector] are many times lower than in other comparable segments of the economy would be unacceptable.”

Medvedev admitted that it would be impossible to increase efficiency without additional investments in fixed assets and personnel training. At the same time, he called for making current expenditures more effective and stopping wasting taxpayers’ money on ineffective projects and institutions.

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