UPDATE: Putin says poor state management caps Russia economic growth

(Adds details in paragraphs 4, 12–17)

MOSCOW, Oct 12 (PRIME) -- Poor state management is a barrier for Russia’s economic growth, President Vladimir Putin said at an investment forum on Wednesday.

“The main goal for us is to raise labor productivity… and a revamp of the real sector of the economy is surely connected with that, adoption of new technologies. And I am reiterating again what I have just said, improvement of state administration. The low quality of administration is one of the factors limiting economic growth,” Putin said.

“We will restrict ineffective spending and raise the efficiency of state spending in virtually all areas and at the same time will increase administration quality in the broadest sense.”

He also said that presidential administration and the government will prepare and analyze information on efficiency of operation of state-controlled companies. He will meet with representatives of largest state-controlled companies to discuss their efficiency until the end of the year.

Putin said that Russia must continue to support the macroeconomic stabilization which has started recently, “continue to focus on inflation goal fulfillment among other things, to carry out responsible budget policies.”

“I will emphasize that we have reached sustainable macroeconomic stabilization over the last several years,” Putin said. “Inflation is falling: it amounted to 6.4% on the year as of the beginning of October. Let me remind you that this figure was 15.7% at the beginning of October 2015,” he said.

The president expects inflation to hit new all-time low of below 6% in 2016. “Next year, in 2017, we will approach to the earlier declared goal of 4%.”

Russia is gradually reducing the key rate and banks are also cutting their interest rates, although they are still high. “Economic revival is reflected on the banking sector as well. The central bank is gradually reducing the key rate, and in general, a trend for a decrease of interest rates for loans has emerged, although their level is quite high yet, and lending to the economy’s real sector has not recovered yet, I mean, the banking loans do not ensure sustainable economic growth.”

Putin said that the Russian banking system is in a good state and does not require interventions. State banks do not receive any orders concerning the operating management.

Putin said that the central bank’s purge of banks from inefficient organization had to be done long ago but “better late than never.”

The president said separately that the government will consider a 2017–2019 budget draft on Thursday and that a 3% budget deficit planned for 2017 would be acceptable even for a world’s leading economy.

Putin also said that Russian companies that assume that prices for energy sources will grow in the future are correct.

“I have been to Turkey, and I said that taking into account the fall of oil prices investment in production has fallen to the lowest figure over the past 70 years, which is a threat to the world energy sector. This is why actions of our companies aimed at work that assumes that the downward trend will end are reasonable, as I see it. But it should be studied in figures,” he said.

Putin said that isolating Russia with economic sanctions is impossible, and political disputes should be solved through compromises. Any restrictions in the economy due to political reasons are harmful for everyone, he said.

“Regarding the isolation – they don’t have enough motor capacity and gasoline to ride through all our borders. It is impossible. What are sanctions? They are an instrument of pressure. We think they are very harmful. And I have said one hundred times, that we are ready to look for compromises, and we would like our partners to perceive us like that,” he said.

Russia will not allow itself to turn into an economic appendix of anyone, as it will not survive this way, he said.

End