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VIDEOS

19.06.2015

Plenary session of the 19th St Petersburg International Economic Forum

President of Russia Vladimir Putin: Good afternoon, ladies and gentlemen, friends,

It is a pleasure to welcome you all to this International Economic Forum in St Petersburg, a city which throughout its history has always been a symbol of Russia’s openness and desire to draw on the best of world practice, cooperate, and move forward together.

First of all, I would like to thank all of the politicians and businesspeople attending this forum for their interest and confidence in our country. Ladies and gentlemen, friends, we see in you serious long-term partners, and it is for this reason that, as is tradition, we always speak with frankness and trust at the St Petersburg Forum about our achievements and new possibilities, and also, of course, about the problems and difficulties we encounter, and the tasks we are still working on.

I saw many of you here a year ago. Over this last year, the global and Russian economies have changed, and in some areas, these changes have been very dramatic. Russia’s economy now has faces restricted access to the global capital market, and then there is the drop in prices for our main export goods, and the small decrease in consumer demand, which had previously been an impetus for economic growth. True – here, I agree with the participants in the yesterday’s discussions at the forum – demand is starting to recover again now.

Looking at energy prices, on which our economy is still very dependent, unfortunately, I remind you that the average price for Urals brand oil in 2013 was $107.9 a barrel. In 2014, it dropped to $97.6 and over January-May this year, was at $56 a barrel. According to Rosstat [Russian Statistics Agency], Russia’s GDP contracted by 2.2 percent in the first quarter of 2015 compared to the same period in 2014, and industrial output was down by 1.5 percent over January-April 2015.

What I want to note, however, is that by the end of last year, as you know very well, people were predicting that we were in for a very deep crisis. This has not happened. We have stabilised the situation, absorbed the negative short-term fluctuations, and are now making our way forward confidently through this difficult patch. We can do this above all because our economy had already built up sufficient reserves to give it the inner solidity it needs. We still have a positive trade balance and our non-raw materials exports are increasing.

Let me give a few examples to illustrate these words. Physical volumes of non-raw materials exports increased by 17 percent over the first quarter of 2015, and exports of high value-added goods came to nearly $7 billion in the first quarter, which is up by nearly 6 percent in value terms and by 15 percent in terms of the physical volumes.

We have kept inflation under control. Yes, it did spike following the ruble’s devaluation, but this trend then slackened off. We saw prices go up quite sharply over the first three months of the year (by 3.9 percent in January, 2.2 percent in February, and 1.2 percent in March), but in April, inflation rose by only 0.5 percent. That the trend is decreasing now is clear. We can see this.

Our budget is stable. Our financial and banking systems have adapted to the new conditions and we have succeeded in stabilising the exchange rate and holding on to our reserves. Let me stress too that we did not resort to any restrictions on the free movement of capital, just as was the case in 2008 and 2009.

The federal budget deficit in January-May 2015 came to 1.48 trillion rubles, which represents 3.6 percent of our GDP. We expect that the deficit will reach 3.7 percent of GDP for the year as a whole. This is in line with the budget law currently in force.

Our gold and currency reserves, which I just mentioned, come to more than $300 billion. I was speaking with Elvira Nabiullina [Governor of the Central Bank] just before, and, according to my information, our reserves came to $361.6 billion as at June 5. They are very slightly lower now, because some money has been used.

At the same time, the Government Reserve Fund came to $76.25 billion or 5.5 percent of our GDP as at June 1, 2015. Our second reserve fund, the National Welfare Fund, had reserves of $75.86 billion, again, 5.5 percent of GDP.

We have prevented a jump in unemployment, which currently stands at 5.8 percent of the active population. I remind you that during the 2008–2009 crisis, the unemployment rate rose to 8.3 percent. The imposition of sanctions forced us to considerably step up our import replacement efforts. We have made significant progress in a number of areas and have achieved some notable results. We have tremendous potential in our engineering and petrochemicals sectors, in light industry, the processing sector, pharmaceuticals, and a number of other sectors. Our agriculture sector’s results are a clear example of what we can achieve.

Of course, we still have a lot of work to do in this sector too, but our dairy production, for example, was up by 3.6 percent over January-April 2015, compared to the same period in 2014. Production of butter increased by 8.7 percent, cheese by slightly more than 29 percent, fish and fish products by 6 percent, and meat by 12–13 percent. The import replacement programme’s aim is not to close our market and isolate ourselves from the global economy. We need to learn how to produce quality, competitive goods that will be in demand not just here in Russia, but on the global markets too. Ultimately, our goal is to make fuller and more effective use of our internal resources to resolve our development tasks.

Let me repeat the point that we are responding to the restrictions imposed from outside not by closing off our economy, but by expanding freedom and making Russia more open. This is not a slogan; this is the substance of our actual policies and of the work that we are doing today to improve the business environment, find new partners, open up new markets, and take part in big integration projects. I note that more than 60 companies with foreign participation have started up practical operations in Russia over just this last year alone. Right now, while this forum is taking place, several companies are opening their doors, including here in St Petersburg. There is a pharmaceuticals company, a company producing gas turbines as a joint venture with foreign partners, and so on.

I want to thank all of our partners who, despite the current political problems, continue to work in Russia, invest their capital and technology, and establish new businesses and create new jobs here. Friends, thank you very much.

Ladies and gentlemen,

The timely measures that we took to support our economy and financial system have worked overall. Now, we are once again concentrating our focus on resolving the systemic tasks on our long-term development agenda. Our task is to ensure sustainable growth, make our economy more effective, raise labour productivity, and bring in new investment. Our priorities are to improve the business climate, train the specialists we need for the economy and public administration, and education and technology. I would like to say a few more words about each of these issues.

Let me start with improving the business climate and making Russia’s jurisdiction more competitive. Our aim is to offer the freest and most predictable and favourable conditions and opportunities for investors. We want to make it profitable to invest in Russia. We set the firm goal for the coming four years of settling tax rates that will remain stable and not increasing the tax burden on business so that companies can plan their work for the medium term.

We will stick to these decisions no matter what the external situation or the burden on our budget. You can see from the figures I cited just before that our reserves are sufficient for us to be able to carry out these policies. At the same time, we are creating new incentives for new developing companies. In this respect, let me remind you that we decided to introduce tax holidays for individual entrepreneurs, offer small and medium-sized business special tax regimes that significantly reduce their tax burdens, and give tax breaks to greenfield industrial companies.

Yesterday, I discussed with the heads of our industrial companies a number of issues that we most certainly do face. The proposal was made to offer tax breaks of this kind not just to greenfield projects, but to all new investment. We will certainly examine these proposals. Let me add, that capital and assets returning to Russia from abroad are also exempted from tax payments, and their owners are fully guaranteed from any kind of prosecution.

At the same time, we will take steps to make Russian companies and their offices abroad more transparent. We have already made the necessary amendments to our laws. Let me stress that these provisions are fully in keeping with the decisions made by the G20, FATF and other international organisations.





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