MOSCOW-Prime Minister Vladimir Putin said on yesterday Russia was emerging powerfully from the global financial crisis but must reduce its reliance on energy and raw materials to see off external threats to its economy. In a speech to parliament, he did not say whether he and President Dmitry Medvedev had agreed which of them would run in next year's presidential election, but underlined his own credentials by outlining his government's economic achievements. Putin told the State Duma lower house in his more than two-hour annual report that inflation would not exceed 6.5 to 7.5 per cent in 2011 and gross domestic product grew by 4.4 per cent in the first quarter of the year.
He also made a number of promises likely to please voters, including putting aside US$2.7 billion for a possible increase in state pensions in August. Other spending pledges included support for farmers, teachers and the military. But he said Russia faced unspecified external threats to its US$1.5 trillion economy and the country of 143 million people could not afford to sit back after overcoming the worst of the financial crisis. "Based on GDP, Russia should enter the ranks of the five leading countries (by 2020)," he told deputies, adding GDP per capita should more than double to US$35,000 by then. "The current beneficial environment in the raw materials and hydrocarbons (markets) should not make us relax. The oil boom we are witnessing only underlines the need to move quickly to a new model of economic development."
High oil prices helped fuel Russia's economic resurgence during Putin's 2000-2008 presidency and the price of oil, Russia's main export commodity, is up 28 per cent this year. But the economy is over-reliant on energy and raw material exports, and any fall in the oil price will have a big impact on its overall economic performance unless it diversifies. "Economic weakness and sensitivity to external shocks result in threats to national sovereignty," Putin said, calling for a decade of "strong, calm" economic development and referring to unnamed groups which he said wanted to destabilize Russia. "Let's be frank. In the modern world, if you are weak, there is always someone who will come in and unequivocally recommend which way to go, what policy to conduct, what path to choose."
Behind such advice "stands crude diktat and interference in the internal affairs of sovereign states," he said. Putin compared Russia favorably with indebted European countries which have had to be bailed out and, criticizing the US policy of quantitative easing under which central banks flood the market with money, pointed out that the United States' triple-A credit rating was under threat.
Presidential election looms
Putin underlined his intention to keep a lid on inflation, one of the biggest threats to economic stability, by saying the unexpected windfall from oil revenues would not be spent and should instead be kept in the state reserves. Russia has struggled to attract as much direct foreign investment as it wants but Putin said he expected the annual sum to rise soon to US$60-US$70 billion from US$40.5 billion in 2010. He also said by 2015 he expected birth rates to rise by 25-30 per cent from 2006 levels and average life expectancy to grow from 69 to 71 years because of US$53 billion worth of state investment in demographic programs. The annual report on his government's work was Putin's last to the Duma before a parliamentary election in December and the presidential election three months later.
Putin, 58, is still seen as Russia's most powerful leader after steering Medvedev into the Kremlin in 2008, and has hinted he may use the March election to return to the presidency or endorse his protege for a six-year second term. Putin, who regularly features as Russia's most popular politician in opinion polls, said nothing directly about the presidency in his speech but could be keeping his options open. "By focusing on prospects for growth and acknowledging that economic reforms are necessary ... Putin is looking to ensure that voters do not associate progress and reforms only with Medvedev," Chris Weafer, Uralsib Capital chief strategist, said. "That is important as he wants to keep his options open ahead of the March 2012 election."
Putin's public approval ratings rose in April to 71 per cent from a more than five-year low of 69 per cent in March, according to a poll released by the Levada research centre yesterday. "He sounds very pragmatic, very populist. He is saying all the right words about Russian stability. That's good to hear but there is nothing very radical. He does not want to sound too liberal and not too socialist," said Ovanes Oganisian, chief Russia strategist at Renaissance Capital. (Reuters)