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President of Russia Vladimir Putin: Good afternoon, colleagues.

We will discuss the results for 2012 today and look at additional measures to ensure economic growth.

The situation in the global economy and on the financial markets was quite tense last year, as you all know. Europe’s debt problems were compounded by problems in the banking sector, sending the region into recession in the second half of the year as a result. But despite these problems, we all know that the Eurozone leading economies are showing a positive dynamic and this is good to see. Nevertheless, the problems in Europe have had a general impact on the global economy and affected other countries, including the  Background information BRICS BRICS countries, Russia too.

Fortunately, our European colleagues succeeded in stabilising the situation by the end of the year, but the markets have not calmed down yet and are still waiting to see how the USA will resolve its ‘fiscal cliff’ problem. A good number of obstacles have already been cleared, but experience shows that the calm that has settled could prove just a temporary lull and we are to be ready for this turn of events too.

The fluctuations on the global markets have made their impact felt primarily on the volatility of Russia’s financial and currency markets. The ruble’s exchange rate changed constantly over the course of the year, but we have already grown used to this situation now. Frankly, I think that there is even a positive side to this situation because this kind of exchange rate fluctuation helps to insulate the economy’s real sector from financial speculators’ actions. There are advantages and drawbacks in this situation. We should look at the problem from every angle.

The year’s economic results are not final yet but the preliminary indicators look comparatively good. The Economic Development Ministry put GDP growth for January-November 2012 at 3.5 percent. We ended the year with unemployment at 5.4 percent, which is low by both Russian and global measures.

We have a stable financial situation and the preliminary results show that the 2012 budget was executed without a deficit.

We have built up substantial currency reserves that have grown visibly. Preliminary results put inflation at 6.6 percent, due to fluctuations for foodstuffs prices. As I have already said, inflation is a relatively objective thing and this level of 6.6 percent is very low, especially when we consider that over the last decade, from 2000 to 2010, inflation was running at an average 12.75 percent.

Real incomes showed good growth over the January-November period, increasing by 8.8 percent. Investment growth also picked up the pace and reached 8.4 percent over the 11-month period, compared to the same period in 2011.

But problems remain. Although we see the positive trends, the jumps in economic indicators are worrying. We do not have the final figures for December yet, and perhaps they will give us more cause for optimism, but the November results do raise some concerns. The Economic Development Ministry’s analysis shows a slowdown in GDP growth. GDP grew by only 1.2 percent in November, whereas growth over the first months of 2012 was 4.2 percent. GDP grew by 4 percent over the second quarter overall, but fell to 2.9 percent in the third quarter.

Industrial output and investment also reflect this slowdown in the dynamic. We are also seeing some problems in agriculture. I spoke about the drought already. We will have to see how the situation develops there. But whatever the case, it is very clear indeed, as I said before and mentioned in the Address to the Federal Assembly too, that Russia is capable of covering its own grain needs and even maintaining considerable export potential. I remind you that Russia had been importing the overwhelming bulk of grain supplies over the previous 20–30 years.

Of course, we could put this hiccup in our economic growth down to the external factors that I mentioned at the start of the meeting.

For most economies the second half of the year was not as successful as the first, but we still need to look into whether this is the only cause of our problems. We are to look at our internal problems and issues, and most important of all we have to decide how to respond to the problems that arise in the global economy and in our own economy.

We now have production capacity running at full again, and unemployment is at a record low.

We actively supported demand during the crisis years. We now have production capacity running at full again, or almost at full, and unemployment is at a record low, as I said. Some experts think that in this situation measures to support demand become less effective and lead not so much to increased output as to rising prices. They therefore propose that we create the conditions for investment rather than focus on stimulating demand. We should analyse whether we have really exhausted these measures’ potential in this situation, or whether, given the European recession, it still makes sense to keep doing something to stimulate demand using budget or monetary policy measures.

We also have to decide on our next specific steps to support investment. I think we should focus our efforts first of all on developing roads and housing and utilities infrastructure, and indeed on infrastructure development in general.

In order to find additional money for these purposes without overstepping our budget limits, I propose that we conduct a comprehensive analysis of the effectiveness of our budget spending and identify possibilities for optimising spending. Independent experts should take part in this work too.

We also need to address labour market policy, including measures for training and increasing labour force mobility so as to create more effective jobs.

Finally, I want to discuss specific solutions for implementing the decisions already made. One of our decisions was on offering attractive conditions for stimulating domestic investment. As we agreed, immediately after setting up the management organisation, we will gradually start investing the National Welfare Fund’s money in profitable infrastructure projects. But let me say here that we actually have to set up this management company and must not just talk endlessly about doing so. We are to set it up, otherwise we will only end up sabotaging our own decision. We will have it established by the end of this year. Implementation of the agreements will start only at the end of next year, once we have reached all of the parameters, but the agreements’ implementation should begin now already.

I therefore want to hear about the situation with setting up the Russian Financial Agency, the projects the fund’s money could be invested in, and the mechanism for organising project selection.

I also want to hear about the situation with providing state guarantees for medium-sized companies’ investment projects. Have the necessary mechanisms been drawn up here, and what are the proposals?

Colleagues, to sum up the points I have made, we need to decide today on the specific measures we will take to continue developing our economy.

Let’s discuss this broad range of issues, and let’s make the discussion as free and frank as possible.

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