President Vladimir Putin dismissed Thursday concerns that Russia’s development was heading in the wrong direction as top officials sounded the alarm over the economic outlook.
Putin spoke at an investor forum after Russia’s economy minister said a combination of high inflation and low growth was “explosive” and the head of the country’s largest bank warned that Russia could repeat the fate of the Soviet Union.
Putin chose to make light of the doom-and-gloom predictions, pledging that Russia would remain an investor-friendly economy and ruling out capital controls or any major revision of privatisations.
Speaking at the annual “Russia Calling” investment forum, Putin jokingly suggested that investors should simply watch his facial expressions to gauge the state of the economy and government policies.
“I guess I should just smile sometimes to show the Devil is not so black as he is painted — forgive me, Lord — or knit my brow to show that we won’t permit something,” he said.
“We sincerely want to build a strong, prosperous, free country open to the world.”
Officials are considering how to mitigate the negative effects of the confrontation with the West over Ukraine which include downward pressure on the ruble, which has lost a fifth of its value against the dollar since the start of the year.
Russia responded to Western sanctions by ordering an embargo on EU and US food and threatened to ban other imports.
Sanctions coupled with the prosecution of billionaire Vladimir Yevtushenkov have further undermined investor confidence and delivered a heavy blow to economy, which is on the brink of recession.
Some Western companies are cutting back their presence or choosing to leave the country altogether.
Putin spoke after his economy minister Alexei Ulyukayev warned that a combination of 8.0 percent inflation and economic growth below 1.0 percent was a “crass and explosive situation.”
Russia’s RTS stock index plunged on Thursday below 1,100 points for the first time since March.
– Gulag doesn’t motivate people –
The chief executive of Russia’s largest bank Sberbank, Herman Gref, for his part launched an unusually open critique, warning that Russia could repeat the fate of the Soviet Union.
Gref pilloried a state-led model of economic development, pointing to a lack of competition and poor governance.
“Why did the Soviet Union break up?” said Gref, a former economy minister.
“There is one key reason which determined the rest: it’s mind-boggling incompetence of the Soviet leadership. They did not respect the laws of economic development.”
Gref seemed to question the Kremlin’s policies including the ban on imports. “I beg your pardon but we import nearly everything.”
He also said a lack of competition meant that even if the ruble bounced back somewhat, consumer prices would not go down.
Gref appeared to target the state’s increasingly repressive policies and what many analysts call the state’s excessive role in the economy.
“You cannot motivate people through the Gulag — like in the Soviet Union,” he said, referring to Stalin’s system of forced labour camps. “People cannot make creative products when they don’t understand the current economic policies and business climate.”
– ‘Close to the abyss’ –
The IMF warned this week that Russia’s “economic outlook appears bleak” with growth forecast at just 0.2 percent this year and 0.5 percent in 2015, although it noted the country has “substantial buffers” such as large reserves and low public debt.
Chris Weafer, senior partner at Macro Advisory, said that the remarks by Gref and Ulyukayev acted as a “reality check” but that he saw no major rift within the government.
But economist Andrei Yakovlev said that the grim assessments delivered by Ulyukayev and Gref showed they were losing influence and chose to air their views in public.
“Before, these discussions also took place, but not in public,” the director of the Institute for Industrial and Market Studies at the Higher School of Economics told AFP.
“We are close to the edge of the abyss and are moving ever closer towards it.”