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Russia highlights key areas that will spur growth

ksenia kondratieva St Petersburg | Updated on June 06, 2019

Russia’s economic growth has slowed down to 0.5 per cent in the first quarter of this year — its lowest levels since 2017.

Investing in human capital, boosting exports and expanding digital trends are some of the key areas Russia is focussing on to support its slowing economic growth, according to high-level discussions at the annual St Petersburg Economic Forum (SPIEF) which kicked off in St Petersburg city on Thursday.

Russia’s economic growth has slowed down to 0.5 per cent in the first quarter of this year — its lowest levels since 2017 — missing all government and analyst forecasts.

The current slowdown was caused by weak domestic demand after an increase in VAT from January, according to Russia’s Economic Development Ministry.

The country has spent the last five years trying to revive its economy, which is suffering from both structural problems as well as an unfriendly external environment caused by rapidly evolving Western sanctions against its core sectors and corporate majors.

“We have to spur structural changes and boost national projects as they address issues that have never been touched before, like productivity,” Russia’s First Deputy Prime Minister and Finance Minister Anton Siluanov said at the SPIEF.

He added that Russia is also working on creating a better investment climate to attract both domestic and foreign investors. “We have started an active policy for reducing the cost of funding, subsidising tax rates for exporters, and allowing for small and medium businesses to have access to cheaper resources,” he said.

Russia’s Central Bank Governor, Elvira Nabiullina, noted that lowering borrowing costs — one of the investor community’s demands — won’t spur economic growth on its own, and Russia rather needs to implement structural reforms.

She hinted, however, that monetary easing could resume in the near future, as consumer inflation has been slowing for two consecutive months in April and May.

Alexei Kudrin, the Accounts Chamber Chairman and the former Finance Minister, said the country’s GDP growth will be less than 1 per cent in 2019. Russia, according to him, needs to improve the rule of law as lack of confidence in government has been affecting investments in the country.

President Vladimir Putin — who will address the gathering on Friday along with the key guest, Chinese President Xi Jinping — on Thursday met several state leaders, heads of global news agencies, and international investors.

Putin’s interaction with members of the Russian Direct Investment Fund (RDIF) and the global investment community has become a tradition of the SPIEF. While the meetings are held behind closed doors, it has been attended by over 40 international investors from about 20 countries, including Germany, France, Japan, China, South Korea, India,and Saudi Arabia, according to RDIF.

Ksenia Kondratieva is a freelance writer based in Moscow

Published on June 06, 2019

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