Putin Sees Russian Recovery Toward End of '09

ReutersPutin will give the opening address on Wednesday night at the World Economic Forum in Davos, Switzerland.
Prime Minister Vladimir Putin said he sees "light at the end of the tunnel" for the Russian economy by the middle of the year, and he called for global rules to avert a repeat of the current crisis.

Some industries may begin to recover by the second half and the Russian economy, which the government forecasts will contract 0.2 percent in 2009, should start to experience "positive trends" this year or in early 2010, Putin said in an interview with Bloomberg Television.

"The industries that developed most actively in the past few years found themselves in a difficult situation," Putin said in the northern city of Novgorod. "Nevertheless, we are optimists," and "we act on the premise that the global economy will rise to its feet gradually and so will the Russian economy."

Russia's $1.7 trillion economy will probably enter a recession this year for the first time since 1998, as Urals crude has slid 68 percent from a July record and credit markets around the world remain squeezed.

Putin and his protege, President Dmitry Medvedev, have blamed U.S. "egoism" for triggering the worst financial crisis since the Great Depression and have called for an overhaul of global rules and institutions. Putin flies to Davos, Switzerland, this week, where he will present his vision for reform to businesspeople and political leaders at the World Economic Forum.

The government has pledged more than $200 billion in loans, cash injections, tax cuts and other measures to increase liquidity and revive the economy. Putin presided over eight years of economic growth during his presidency, which ended in May, aided by rising energy prices and a surging global economy.

He defended Russia's currency policy, saying the ruble was devalued "gradually and carefully" to give people time to convert their savings into foreign currency or invest them elsewhere. The currency has lost 18 percent against the dollar since mid-November, when the Central Bank began allowing it to depreciate.

The depreciation, engineered through 21 separate expansions of the ruble's trading band against a target basket of dollars and euros, enabled Russians to decide whether to "stay with the ruble, move to dollars or euros, or do something else, go into real estate, to consider savings," he said.

"We did not act as some countries, we did not crush the national currency overnight," Putin said. "We did all that gradually and carefully. We have consciously decided to spend gold and currency reserves, to give the possibility to participants in the economy, including citizens, to realize what is happening and make decisions."

Putin pledged last month to use reserves to prevent the "sharp" declines in the ruble that marked its 71 percent devaluation against the dollar in 1998.

"Russia's economy is not what it was in 1998," he said. "That's why we allow ourselves to quite gently deal with the rate of the national currency."

Putin renewed his criticism of U.S. fiscal policy, calling for Washington to make more information available to countries affected by its decisions.

"Russia holds 50 percent of its gold and currency reserves in the American economy, and we are not indifferent to what America's budget deficit will be in 2009," Putin said. Countries "have a right" to "common standards in the world economy," he said.

"We understand perfectly that there cannot be absolute agreements in the world similar to those adopted within the European Union," Putin said. "But some sort of framework agreements are still possible."

He also called for "some unification" of the world's equity markets, blaming increased competition between bourses for deepening the financial crisis.

Putin advocated the establishment of regional investment funds as a step toward the introduction of regional reserve currencies to offset the influence of the dollar and the euro.

"The economic crisis is helping us to a certain extent," Putin said. "It's making us optimize production, improve the quality of personnel, retrain our work force. All of this incites us to come out of the crisis more mature, with better prospects of development."