Despite falling commodity prices, the Kremlin will stick to its fiscal rule which caps the budget deficit at 1% of GDP, Prime Minister Dmitry Medvedev told the State Duma in his annual economic address.

The Russian Prime Minister warned the State Duma that the global economic recession has a very serious potential to spill over into Russia.

"The first few months of this year are showing that the tendency for the world economy to slow persists,”Dmitry Medvedev said. “There are serious risks here," the Russian Prime Minister added.

“We had foreseen a slowdown in development connected with the situation in the global markets,”Medvedev stated adding that the government has its own vision about what has to be done in these conditions.

"But these measures have to be discussed in detail with experts, and with the deputies."

He stressed the need to adhere to the budget rule that sets the minimum size of the Reserve Fund at 7% of GDP.
 
"[The rule] makes it possible to improve the macroeconomic stability of the Russia economy, its investment appeal in the final analysis, and ensure the strict fulfillment of all the state's spending commitments. This rule is especially important at a time when unfavorable scenarios are materializing in other countries, a recession is taking place, there is a danger of a drop in prices for hydrocarbons," the Prime Minister said.
 
"The experience of 2008, the experience of a dramatic drop in prices for raw materials, ought to have taught us what is to be done. This is why there is such a budget rule," he added.

The Prime Minister said the Russian economy has been performing relatively well. Russian GDP grew 3.4% in 2012, while the unemployment rate hit an unprecedented low level – 5.5% against 6.5% in 2011. Consumer-price inflation reached 6.6%, due to “harvest failure, among other factors.” He confirmed forecasts that Russia's grain harvest will total between 90-95 million tonnes in 2013.

$70bn in investments by 2018

“Russia is set to develop in the context of tough economic, technological and intellectual competition. To face the challenges in a modern and timely way we must use all our resources,” Medvedev pointed out.

He also said direct foreign investments in the country could reach up to $70 billion by 2018.

"Now Russia is ranked sixth in the world and second among the BRICS states in the volume of direct foreign investments for the last five years. In general, this is quite a good figure of about $265 billion," the Prime Minister noted, adding "there is definitely room for improvement."  

He remarked Russia's government institutions and private companies haven’t suffered any damage from the crisis in Cyprus.

"If we talk about the scope of the losses, I have held several meetings on this account and can tell you openly: We don't have any losses. I mean government institutions and even a significant number of private companies."

All major privatization deals in Russia must be open to public scrutiny, according to Medvedev.
"The government's privatization plans must be worked out in advance, and for the long term. Information about every meaningful transaction must be open to public discussion and scrutiny," the Prime Minister noted.

IMF lowers Russian growth forecast

The IMF has cut Russia's 2013 growth estimates by a fraction to 3.4 %. Compared to Europe’s decline the forecast is positive, but still weak when compared to Asian peers.

The IMF is more optimistic about Russia's economy, more so than the Russian government.

Last week Andrey Belousov slashed the country's GDP growth forecast to 2.5% and warned of an impending recession in autumn

Medvedev will hold a meeting with President Putin and other financial officials next week to iron out the details of Russia’s economic plan, paying special attention to corruption, capital flight, and oil dependency.

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