UPDATE: Russia needs to change economic development model – PM

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MOSCOW, Jan 14 (PRIME) -- Russia needs to change its economic development model, not only stabilize the ruble’s exchange rate and pull through the external pressure, Prime Minister Dmitry Medvedev said Wednesday at a forum.

“It is very important that we not only objectively assess and properly react to changes on our traditional external markets; not only cope with external economic and political pressure; not only stabilize current fluctuations of the exchange rate…The issue is about changing our very model of development,” Medvedev said.

The old energy model is no longer working, does not provide a stable growth of stimuli for investments, he said, adding that even under high oil prices Russia’s economy began to stagnate.

Russia’s budget rule should be amended in accordance with new forecasts for oil prices, and it is important to keep the general principle of the rule intact, he said.

Medvedev also said that “many things are playing against the ruble now – oil prices, which are low beyond all reason, and sanctions.”

“Nevertheless, I think that the central bank’s current policy is correct. We are not going to squander our foreign currency reserves, we have enough economic mechanisms to ensure the ruble stability. Moreover, even under bad circumstances we have a positive balance of payments, which is a fundamental factor of setting a balanced ruble’s rate,” he said.

The government will not stop a free ruble conversion, as it will resurrect a black market. It will not severe links with foreign countries or change its economic policy to a mobilization model as returning to the past would be a terrible mistake.

Medvedev also said he hopes that Russia’ relations with the E.U., it main trade partner, will normalize soon.

Russia remains a reliable borrower, creditor and supplier and will fulfill its international obligations. Sanctions come and go, “just like their authors, while a country’s business relations, economic interests and reputation stays,” he added.

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