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. Last Updated: 07/27/2016

Putin Aide Sets Out Program for Growth

The government will seek to capitalize on economic growth this year by tackling corruption and attracting foreign technology, as well as considering tax cuts, an economic adviser to President Vladimir Putin said Friday.

In order to tame corruption, seen as a threat to future growth, the government will streamline regulations and place more state-owned assets on the stock market, Arkady Dvorkovich said without offering specific details.

The government should also lower taxes to assist sustainable economic growth, Dvorkovich said. The three-year budget currently being reviewed by the State Duma provides for an annual 5 percent reserve for additional spending requirement or tax reduction, he said.

In a measure to optimize performance among government workers, ministers have been given the right to allocate bonuses to officials for working effectively and to reduce salaries for poor results, he said.

As part of a strategy to revive struggling industries, the government will encourage foreign investors to import technology as well as investment, he said.

Dvorkovich also noted that the Kremlin does not support proposals to hike the mineral extraction tax for gas, despite the Finance Ministry's efforts to promote the move. He urged local companies to become more energy efficient to stay competitive in a world of growing energy prices, describing the task as a major challenge for the economy.

The sagging stock market could receive a boost this year if the government decides to invest state pension funds, which currently stand at 270 billion rubles ($10.4 billion), into Russian corporate bonds and shares, Dvorkovich said.

Dvorkovich dismissed talk of a stock bubble, saying the market would expand in the second half of the year, with the expected placement of $20 billion worth of shares by domestic companies.

The government is trying to decentralize budget revenues and spending, and a key step for this, replacing value-added taxes with sales taxes, is in the offing, he said. "We will continue to work in this direction. I think it will eventually happen," he said.

The economy could grow by more than 7 percent this year, an increase of 6.7 percent from last year, Dvorkovich said. The growth rate of 7.7 percent in the first quarter was fueled by high productivity in the alcoholic beverages sector, which rebounded after overcoming legislative hurdles last year, he said.

Inflation is on target to stay within 8 percent by year-end because high rates in April and May are offset by low first-quarter results, he added. World Bank's chief economist for Russia, John Litwack, told a news conference earlier this week that he believed the government would find it very difficult to keep inflation below this target, however.

Direct foreign investment in the first few months of the year amounted to $10 billion, compared to $3 billion in the same period last year, Dvorkovich said.

An MDM Bank report released Friday appeared to lend support to Dvorkovich's optimistic views.

"Economic dynamics continue to impress," MDM Bank noted in the report. "We believe the foundations for further strong economic growth remain robust."