Russian Economy From Recession to Recovery

By: Pravda

In his annual report to the Russian Parliament on the Government’s handling of the economy, Prime Minister Vladimir Putin declared on Tuesday that the recession is over, that healthcare reforms are on the way, promising to restructure the financial management of the financial sector, while stating that optimism is fuelled by the provisional forecasts after Q1 of 2010.

Vladimir Putin stated that his Government avoided an economic collapse (such as the one in 1998). Admitting that some measures were more effective than others, he stated that the forecast for growth is now at 4% and that the results for the first quarter of the year fuel optimism.

While many countries reduced social allowances and froze pensions, he pointed out, Russia did not, while some countries decided to cut expenses arbitrarily, Russia chose a different and more humanitarian path. In fact in 2009, Russian budget expenditure grew by 27.3% over 2008 while accumulated reserves were invested and budget allocations rose by 50% for wages, pensions and social allowances.

Admitting that the more pessimistic forecasts had not proven true, Vladimir Putin stated that Russia had reacted to the currency crisis as a strong power should, “acting resolutely and decidedly”. He added that while the recession is over, “the situation is far from being trouble-free” and demands a continued “conscientious financial policy”.

Indeed, during 2009 real income rose by 2.9% over the previous year while the integration of the national economy, the Russian financial sector and the social sphere were protected and preserved.

Regarding the Government’s social initiatives, Vladimir Putin stated that rather than raise more money through increased taxation, the Government should concentrate on a more efficient distribution of existing revenue. However as from 2011, Social Security contributions for companies will rise from 26 to 34% and this will fund a financing of the health service. Pensions will continue to rise (by 45%) and the Government promises extra financial benefits for mothers and war veterans.

As far as the future is concerned, Vladimir Putin stated that there are tangible signs that the banks have restarted lending schemes and this can only fuel a sustained economic development and growth which will build on the positive indicators visible already today, namely an increase in retail sales, a rise of 7% in real income and a stabilization of the unemployment rate at 8%. With the feelgood factor provided by the economic setting and the increase in buying power, this rate can only continue to decrease, since economic security is translated into spending and investment which in turn generates jobs.

Pravda.ru

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