November 20, 2019 / 11:23 AM / 2 months ago

UPDATE 2-Russian economic growth picks up in October due to strategic spending

* Russian GDP up 2.2% y/y in October

* Growth helped by budget spending on big projects

* Russian officials divided on Putin’s plan to boost growth (Updates with official data release from Economy Ministry)

By Gabrielle Tétrault-Farber and Andrey Ostroukh

MOSCOW, Nov 20 (Reuters) - Russia’s economy expanded by 2.2% in October year-on-year, picking up due to spending on strategic national projects launched by President Vladimir Putin, Finance Minister Anton Siluanov said on Wednesday.

Putin has put 13 projects, ranging from healthcare and education to infrastructure, at the heart of his fourth six-year term that began in 2018. He has ordered the government to try to raise economic growth above the world average by 2025.

“We are launching national projects now ... this includes work with business, with (Russian) regions ... We already see an impact from this, we see economic growth starting to pick up,” Siluanov told a business forum.

Putin’s plan envisages spending 26 trillion roubles ($406 billion) but officials are divided over whether the projects, which will be financed by the state and by private investors, can help boost growth, which is projected to be close to a modest 1% this year.

Alexei Kudrin, head of the state Audit Chamber and a former finance minister, known for being an outspoken critic of the government, told the forum the projects plan might not boost the economy.

The Russian Economy Ministry said a pick up in growth in October from 2.0% in September had exceeded its expectations but was not sustainable, given its “compensational nature” after the sluggish performance of the first half of 2019.

In the third quarter, Russia’s gross domestic product grew by 1.7% in year-on-year terms, up from 0.9% in the second quarter.

Separately on Wednesday, central bank governor Elvira Nabiullina told Russian lawmakers she was concerned over slow growth this year and blamed it on a lack of structural reforms.

“Overcoming structural curbs is the most important task for our economy,” she said. Under its mandate, the central bank targets inflation but not economic growth.

Nabiullina also said she saw room to ease monetary policy further after a period in which monetary policy was kept moderately tight to curb inflation.

Andrey Kostin, head of Russia’s second biggest bank VTB , told Reuters this week he believed Putin’s national projects could help Russia boost its growth in the same way that U.S. President Franklin Roosevelt’s “New Deal” helped end the “Great Depression” in the 1930s.

But the key, Kostin said, was to maintain tight control over funds “so they are not stolen” and to give private business flexibility when it comes to making decisions related to co-investing with the state.

Kostin said this should give businesses assurance they would not become a target of possible criminal prosecution for any decisions taken. ($1 = 64.0250 roubles) (Additional reporting by Elena Fabrichnaya, Tatiana Voronova; Writing by Katya Golubkova; Editing by Andrew Osborn and Alison Williams)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below