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Meeting on economic issues

January 17, 2023, Novo-Ogaryovo, Moscow Region

The President held a videoconference meeting on economic issues.

The meeting was attended by Prime Minister Mikhail Mishustin, Chief of Staff of the Presidential Executive Office Anton Vaino, First Deputy Prime Minister Andrei Belousov, Deputy Prime Minister – Chief of the Government Staff Dmitry Grigorenko, Deputy Prime Minister Marat Khusnullin, Presidential Aide Maxim Oreshkin, Minister of Economic Development Maxim Reshetnikov, Finance Minister Anton Siluanov and Governor of the Central Bank Elvira Nabiullina.

* * *

President of Russia Vladimir Putin: Good afternoon, colleagues,

We agreed to meet today to discuss the economic agenda.

Senior officials from the Government and the Central Bank are present at this meeting. We will talk about key indicators and trends in the Russian economy and on the global markets. We will also review specific measures to tackle the priority development tasks – more precisely, the objectives for 2023 that we extensively discussed in December at a meeting of the Council for Strategic Development and National Projects and at a recent meeting with Government members.

I will start by revisiting some aspects of the Russian economy’s performance last year.

As was previously noted, its actual dynamics proved to be better than many expert forecasts. The Ministry of Economic Development estimates, as our colleagues will report in a bit, that Russia’s GDP decreased between January and November 2022, but only by 2.1 percent. As you remember, some of our local experts, not to mention the foreign ones, predicted a decline of 10, 15 or even 20 percent.

The expected overall annual outcome is a 2.5-percent decrease in GDP. I want to stress that this is the annual result because in the third and fourth quarters, we recorded economic growth, though against the sharp downfall in the second quarter. Our task is to bolster and maintain this positive trend.

I should note that in many of the essential backbone industries such as construction, agriculture, industrial production, the defence industry and some others, the scope of production not only remained at the same level but, on the contrary, despite the unprecedented external pressure, expanded, creating new jobs, helping maintain stability on the labour market and reducing the unemployment rate to the lowest level in modern history.

However, there are still problems with part-time jobs in some regions and in some branches, and with low wages, especially in the regions and cities where troubled economic industries are concentrated. You know that the biggest decline was recorded in the car industry and some other sectors. The Government should work in cooperation with the regions to redress this situation. The main thing is that we have every opportunity to do this – we must encourage employment and the growth of wages – real wages.

Furthermore, the defence industry is making a big contribution to the dynamics of the processing sectors. In the past year, it gained significant momentum and it is continuing to build up its capacities. Plants are working in several shifts and even around the clock. In this context, I would like to thank all defence industry workers for their intensive and responsible labour. Its significance overall and now in particular is very high.

At the same time, as I have already said, the situation in some industries requires special attention, both from the federal Government and from our colleagues in the regions, on the ground. I am primarily referring to productions that were mostly oriented to the external market.

Thus, the situation in the timber industry complex remains difficult. In November, the processing of wood and the manufacture of wood products decreased by 21.4 percent. Plants in the northwest of Russia were the hardest hit. I believe we must discuss this issue at a separate meeting.

Now I would like to emphasise once more that it is necessary to maintain the operation of this industry and others that have been affected, to retain their work teams and provide an impetus for their development by encouraging domestic demand and intensifying the processing of raw materials in our country, at our plants and our manufacturing facilities.

Frankly, we have talked about this many times when limiting the export of roundwood. This was our goal, but not everything was finalised. We were talking about the necessity to give up the export of roundwood and raw wood and supply all of it to the domestic market and later to supply products with greater added value. Now it is necessary to expedite this process as much as possible. As I have said, we have the objective basis and every opportunity for this.

Let me remind you that we have taken many special measures to support several industries of the national economy. Thus, businesses and government bodies are already consistently and meticulously helping these companies not only to reach pre-crisis levels but also to ensure their long-term, strategic development with reliance on new technological and production solutions. I would like to ask the Government to always keep a finger on the pulse of this.

I would like to mention in particular the oil-and-gas sector. Despite the sanctions pressure, in 2022 oil production in Russia increased by about 2 percent. Overall, Russia produced 535 million tonnes of oil.

At the same time, the extraction of natural gas decreased by 11.8 percent. I would like to note that, as you know, gas prices have increased considerably because of the actions of Western countries. As a result, Russian gas producers, exporters have made a good profit in the past two years and have substantially increased their contribution to the national budget.

Overall, last year federal budget revenues went up by 10 percent to constitute 27.8 trillion rubles. That said, our expenses also increased and at a much higher rate, more noticeably – by 25 percent, exceeding 31 trillion rubles.

As a result, the federal budget deficit totalled 3.3 trillion rubles or 2.3 percent of the GDP. We mentioned this, and I also said that this deficit level is still one of the best figures for the G20. Nevertheless, it is important to work consistently to preserve the sustainability of state finances. Today, we must talk about this as well.

Now to inflation. It stood at 11.9 percent in late 2022, which is less than the Central Bank and the Government predicted and is estimated to drop below the 4 percent target in the second quarter.

Colleagues, not long ago I cited your estimates that we may see inflation drop to 5 percent in the first quarter and maybe even under 4 percent in the second quarter. This is critically important for real individual incomes and the economy in general, since predictable and moderate price dynamics are a key factor when making decisions on ramping up investment activity or more affordable loans for businesses and real sector enterprises.

To reiterate, inflation directly affects individual incomes. This year, we must achieve noticeable, tangible growth in real wages and improve the well-being of Russian households.

Also, the construction of housing and infrastructure is critical to improving the quality of life, promoting business activity and developing territories. We did quite well in 2022 in this regard. A record-high volume of housing – 101.5 million square metres – was commissioned which, I believe, is something we have not seen in recent history, and probably even in the Soviet Union.

Last year, over 27,000 kilometres of roads were repaired, and 1,600 kilometres were built or renovated. Our goal for the years ahead is to bring 85 percent of the federal and busiest regional motorways, 136,000 kilometres in all, up to standard. The lists of related projects, estimated at 13 trillion rubles, have been approved and are scheduled, as we know, to be completed within five years from 2023 to 2027.

It is important to not just implement the plans in full but implement them ahead of schedule. High quality and safe roads are the basis for launching new, additional investment projects in industry, agriculture, for building social facilities and residential quarters, improving the connectivity of our territories, including the new constituent entities of the Federation.

The programme for developing regional infrastructure is picking up pace. Infrastructure budget loans are key to funding this programme. The Council for National Projects, which I mentioned earlier today, ruled to expand the limit of these loans by additional 250 billion rubles this year. In addition, funding projects with infrastructure bonds are expected to increase to 300 billion rubles.

Let me add that, just like with roads, the advanced financing mechanism should be used here as well and facilities should be commissioned ahead of schedule.

I would like us to discuss this today, report to me about how these decisions will be implemented. Let's get to work.

Mr Reshetnikov is our next speaker. Please go ahead.


Vladimir Putin: Let us sum things up.

Overall, as we discussed earlier, I believe we have done quite well. I said this publicly earlier, and we are aware of it anyway.

Look, 2022 was a challenging year for us, but we managed to navigate the risks that came up largely unexpectedly. I will not go into details or speculate on what could have been done better, but we have successfully overcome these risks overall.

I will now say the most important thing, and we will get into details later: we understand overall what kind of risks we will face in 2023. That is, in 2022 we did not know about them and did not understand them, but we still navigated these financial, budgetary, structural, and logistics risks, to name a few. But we have passed through this “forest” not knowing what will happen next, making decisions along the way.

We can see 2023 better from the perspective of these risks. Technology-related risks and infrastructure risks have not been overcome. We have a clear idea of what is happening and what kind of complexities will come our way down the line.

So, if we understand this, we should be able to handle this much better, better even than in 2022. Importantly, we must see the developments for what they are. It is important not to exaggerate or downplay things – we need to be realistic in our estimates.

Thankfully, we have good results in agriculture thanks to a number of earlier decisions. Without a doubt, this sector must be given a chance to make some money so that it can invest in the 2023 harvest, food processing and livestock production.

Mr Mishustin mentioned it earlier, and I would like to underscore this again. I want the Prime Minister to see to it personally and, if necessary, to ensure the financial results of agro-industrial companies. We cannot afford for everything to be exported outside the country. It can get exported in a heartbeat despite freight- and insurance-related logistics restrictions, understand? It is already being done.

So, we definitely need reserves. We have no way of knowing what the agricultural results will be like in 2023. Look what is going on: it is warm in Europe, but in Turkmenistan – I spoke with the President [Serdar Berdimuhamedov] today and it is minus 25 degrees Celsius there. In Turkmenistan, mind you. In Uzbekistan, it is minus 23 degrees. What kind of weather are we going to have here? We cannot tell for sure, either, which means we absolutely must have stable reserves. We must keep them here.

We are making progress in infrastructure and agriculture. Construction showed very strong growth. How much is it, Mr Khusnullin? 5.6 percent?

Deputy Prime Minister Marat Khusnullin: Mr President, I think it will be around 6–6.5 percent.

Vladimir Putin: You see. Tentative numbers were 5.6 percent, but now we have 6.5 percent, which is great news.

Tourism and the energy sector as a whole are doing well. Infrastructure and transport engineering – what we see lying on the surface – is exactly what we need right now. I very much hope that Mr Belousov will keep working on import substitution in the high-tech industries. Of course, this is in fact what we are doing: we are allocating funds for the national development goals and seeing good progress. Roads and related industries are in good shape and some areas of the energy sector such as the coal industry are expanding. But we need to keep an eye on it.

Thank you very much. Best wishes to you.

January 17, 2023, Novo-Ogaryovo, Moscow Region