President Vladimir Putin has admitted for the first time that Russia’s economic problems are home-grown.
He has previously blamed a slowdown on outside factors, especially the debt crisis in Europe – its biggest export market.
He said: “In GDP terms, Russia is among the top-five global economies, which is good. However, we lag developed countries by two-thirds to three-quarters on such a key indicator as labour productivity.”
Putin hit out at his government for failing to prevent the vast illegal outflows of cash from Russia. He said “nothing has been done” to implement an initiative he launched a year ago to stem that capital flight.
An estimated 35 billion euros a year leaving the country has sapped both investment and state coffers causing the fragile recovery to stall, leaving the Kremlin reliant on high oil prices to balance its books.
The government now expects the economy to grow by just 1.4 percent this year.
‘Shame’ says Kudrin
Former Finance Minister Alexei Kudrin, still widely viewed as Russia’s most competent economic policy maker, faulted Putin for failing to act sooner.
“It’s a shame that so little has been done,” Kudrin said on Twitter after the speech. “The president’s proposals for reactivating the economy are a tactical response to the problem. We need a strategic plan to get out of stagnation.”
Speaking earlier, Europe’s development bank said that Russia needed to restructure and sell the large state companies and banks that play a dominant role in business and finance.
“For Russia, without reforms, we are very pessimistic about growth,” said Erik Berglof, chief economist of the European Bank for Reconstruction and Development.