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Russian economy minister expects positive GDP dynamics in nearest future

July 19, 15:40 UTC+3
Alexei Ulyukayev's most important statements after meetings with Japanese officials and businessmen during his official visit to Tokyo
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© Sergei Fadeichev/TASS

TOKYO, July 19. /TASS/. Dynamics of Russian GDP will become positive in the nearest future, Minister of Economic Development Alexei Ulyukayev said on Tuesday at the meeting with Japan’s business community.

"The situation in the real sector of the economy is improving. While production output declined 3.7% last year, its contraction lowered to 1.2% in the first quarter of 2016 and 0.8 in May. We expect GDP dynamics to become positive in the coming future," minister said.

Dynamics of industrial production has already become positive, Ulyukayev said.

"This pertains to producing branches and to the processing industry since May of this year. Nevertheless, many problems remain and we need to use the potential definitely and objectively existing in our trade and economic relations," minister added.

Economic relations with Japan

The minister said Russia and Japan were discussing creation of a joint investment platform with the participation of the Russian Direct Investment Fund (RDIF).

"Of course, it is necessary to create mechanisms of support trade and investments. We are discussing creation of an investment platform. From the Russian side this will be the Russian Direct Investment Fund, which was set up in order to invest together with foreign investors, to create comfortable conditions for them legally and financially for investments in the Russian Federation. As for the Japanese side - we are working with large institutions such as JBIC (Japan’s Bank for International Cooperation - TASS). We think that it will bring a good result," Ulyukayev said.

Russia proposed Japanese company JDC to create a joint project for establishing facilities for production of liquefied natural gas (LNG) in Sakhalin and along the pipeline Power of Siberia, said Ulyukayev in an interview with Japanese TV channel NHK.

"It concerns creation of a medical center in the Far East, facilities for LNG production on Sakhalin Island and along the Power of Siberia pipeline, some others projects," he said, talking about specific joint projects Russia wanted to offer Japan.

Later, the minister told Russian reporters that held talks with JDC before the interview, proposing the project and the reaction was positive.

"We discussed it. Yes, there is now interest. Only with JDC for now, but the list is not closed," Ulyukayev said, talking about the joint LNG production in Sakhalin.

According to Ulyukayev, the list of potential participants and investors of the project might be expanded.

Ulyukayev also said that during the visit to Japan, the Russian delegation intends to offer Japanese colleagues specific projects for joint implementation. "We are going to give these projects to our colleagues in the Japanese government. We look forward to a quick review and response. Some of these projects already have Japanese partners, and some projects are completely new. We would like to do this as quickly as possible," the minister said.

He added that during the visit the Japanese side was going to propose establishing a working group on the development of these projects and the regulatory framework.

Brexit consequences

Ulyukayev has also touched upon the subject of Brexit. saying the situation on world markets calmed down after Brexit, but there are still risks of increased volatility in the financial markets.

"So far, the impact of Brexit on the world markets is minimal. There was a short reaction for two or three days. The period of high volatility in the markets has passed, markets calmed down. But the risks are there, because the process is long and complicated, participants of that process do not fully understand the end result, as well as future relations between the UK and the EU. Thus, some fluctuations, volatility in financial markets are still possible," he said.

Ulyukayev added that the measures that Russia has taken to support financial stability in the markets - suc as sufficient reserves, monetary and fiscal policies to support investment policies - are yielding results.

"Our capital movement has changed. We had a huge outflow in 2014 - $153 bln, in 2015 it was significantly lower - $57 bln, and starting from May 2016 we see capital inflow. It is rather small so far, but it exists," Ulyukayev said.

According to him, this is an example of restoring confidence in the Russian financial market, and in the Russian economy in general.

Ulyukayev added that investors show great interest in Russian assets, and promised to maintain this stability.

Situation in Russia

At a meeting with business circles of Japan, the minister noted that the outflow of capital from Russia in 2016 would be substantially less than its forecast of $35 bln.

"I recall that in 2014 the outflow of capital from Russia totaled $153 bln, in 2015 it decreased, but was still very big - $57 bln. Our forecast for this year was $ 35 bln, but in reality it will be much less, if there will be any at all. Because, since May we have been watching capital inflow. In May-June it was only $2.5 bln, but it is a different picture," minister said.

He also noted that Russian authorities intended to lower the government share in assets and return to proactive privatization.

"I’d like to invite attention to our return to more active privatization policy now. We would like to lower the government share and broaden opportunities for private business for acquisition of profitable efficient assets," Ulyukayev said. The deal of privatizing a stake in Alrosa diamond miner was completed successfully, he added.

Moreover Ulyukayev expects further strengthening of the ruble in the future. "The current price of Urals oil is $44 per barrel, and, according to all forecasts, it will slightly grow. On the other hand, the current exchange rate is 62 rubles per dollar, which means it has strengthened significantly. And apparently it will continue to grow, because the situation with the balance of payments has changed," he said.

According to Ulyukayev, the lowest point of oil prices was observed in January 2016, when the price dropped to $24 per barrel and the ruble fell to 80 rubles per dollar.

In general, the Economic Development Ministry does not expect the oil price to recover soon. The oil price trend will remain at the current level for a long time, the official pointed out.

"Decline of prices for raw materials - especially oil - has significantly reduced the volume of Russian exports. And we do not expect, and should not expect oil price dynamics to be restored in the near future - it will happen over a long period of time," Ulyukayev said.

He added that the shift of exchange rate relations, depreciation of the ruble exchange rate against the Japanese yen and the currencies of other trading partners of Russia led to the fact that Japanese products largely lose their competitiveness in the Russian market, and this hinders export to Russia.

 

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