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Finance Minister: Russia to lower projected economic growth rates

July 04, 2013, 19:43 UTC+3

The average annual rate of economic growth in Russia is projected at 4.1 percent in 2013-2030

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MOSCOW July 4 (Itar-Tass) - The Russian government is lowering projected economic growth rates, Finance Minister Anton Siluanov said on Thursday, July 4, after a government meeting which focused on the main guidelines for the country’s budget policy up to 2016.

“In fact, we are working on a very complex budget because we are entering a period when the projected economic growth rates have to be lowered in 2013 and in 2014-2016,” the minister said an interview with Russia 24 television.

“New tasks are being set but there are no resources for their implementation. This is why, we will have to look for resources within the budget this year, just as we did last year, look through the budget and review the priority of expenditures,” Siluanov said.

“We should line up all of our commitments and look at which of them we can give up and which new ones can be added,” he added.

Siluanov admitted that this is a hard task because the current budget rules set the limit to expenditures and this limit may not be exceeded since the budget will run a deficit as it is.

“Earlier, we planned to have a deficit-free budget by 2015, but now we see that the deficit in 2015 will be 0.6 percent of GDP and about as big in 2016,” he said.

In March the government had approved a socioeconomic forecast for Russia up to 2039.

According to the forecast, the Russian economy will grow steadily until 2030 but at a rate of no more than 4 percent a year.

It said such growth could be possible under an innovation scenario, according to which the growth will be stable and will decrease from 4 percent (before 2015) to 3.8 percent by 2026-2030, while investments will go down gradually from 7.3 percent to 4.8 percent by 2025-2030.

The scenario calls for a greater role of investment in generating economic growth and strengthening Russia’s positions in the world economy. It is based on the creation of modern transport infrastructure and a competitive sector of high-tech production and knowledge economy along with modernisation of the energy and resource sectors.

According to the scenario, innovations will have to be turned into a leading source of economic growth and increasing the efficiency of human resources in 2020-2022 in order to improve social parameters of development.

Private and public expenditures in the field of healthcare will grow from 4.6 percent of GDP in 2020 to 7.1 percent of GDP in 2030, in education from 5.2 percent to 7 percent of GDP, respectively.

The average annual rate of economic growth in Russia is projected at 4.1 percent in 2013-2030, excluding possible global economic crises.

The scenario is based on a moderate growth of prices of oil and other mineral resources of about 1 percent in real terms in 2016-2018. The price of Urals blend will be 116 U.S. dollars per barrel in 2020 and 164 U.S. dollars in 2030. In 2013-2030, oil will cost 90-110 U.S. dollars per barrel in real terms in prices of 2010.

The price of natural gas exported to foreign countries is projected at 340 U.S. dollars per 1,000 cubic metres in real terms, which is higher than in 2010-2011.

The Russian economy will be able to reach and exceed the growth rate of 5 percent declared by Prime Minister Dmitry Medvedev only after 2016, provided Russia chooses an accelerated development scenario and softens the budget rule.

This scenario calls for implementing the tasks set by the president in his decrees in May 2012 to create and upgrade 25 million highly productive jobs by 2020, increase investments by at least 25 percent of GDP by 2015 and to 27 percent by 2018, increase the share of high-tech products made in high-tech and science-intensive sectors 1.3 times by 2018, boost labour productivity 1.5 times and raise real wages 1.6-1.7 times by 2018.

The average annual GDP growth rate under this scenario should increase to 5.4 percent and Russia’s share in the world economy will grow to 5.3 percent by 2030.

The ministry also prepared a conservative scenario with a moderate growth rate of no more than 3.2 percent based on intensive modernisation of the fuel and energy and resource sectors, with a relative delay in civilian high-tech and medium-tech sector.

Under this scenario, the economy will decline from 3.7 percent a year until 2015 to 2.5 percent by 2026-2030, while investments from 7 percent to 3.6 percent, respectively.

The Russian economy will only double by 2030 while the share of real disposable income of the population in the global GDP will decrease from 3.8 percent in 2012 to 3.6 percent in 2030.

The ministry believes that by 2030 Russia will reach a level of economic development that matches that of a leading world power of the 21st century. By that time, the Russian economy will come close to the front edge of global technological development and the quality of life in Russia will exceed the average level in OECD countries.

These results will be achieved by creating a globally competitive institutional environment that stimulates entrepreneurial activities and by attracting capital into the economy.

This will require Russia to improve the business environment and investment climate, improve public governance in the economy, create an international financial centre that will provide the private sector with necessary resources, and form the Eurasian Economic Union in the post-Soviet region.

By 2030, the public sector will shrink considerably in the economy, the majority of state-owned corporations will be liquidated, and state property will be privatised.

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