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Economic Development and Trade Minister German Gref and Deputy Prime Minister Alexander Zhukov on revision of national social and economic development forecasts for the next three years

President Vladimir Putin: What motivated this revision of the social and economic development forecasts for the next three years?

Minister German Gref: In accordance with our programme for work on the three-year budget, we clarified our definitive economic development forecast for the three-year period last Friday.

The way investment flows are moving this year gives us grounds for an upward adjustment to all the macroeconomic indicators related to investment, above all GDP and industrial output growth. We forecast an economic growth rate of 6.1 percent in 2008, 6 percent in 2009, and 6.2 percent in 2010. We have revised our forecasts upwards across the board from 0.1 percent to 0.2 percent above all because we now have a clear picture of investment growth that incorporates the development boost that comes from growth in the processing sectors and infrastructure development.

We have slightly lowered our inflation forecast, above all for 2009–2010. Inflation will remain at 8 percent this year, will drop to 7.6 percent in 2008, 6.8 percent in 2009, and will be at 6.3 percent in 2010. We recalculated all the economic deflators related to changes in the consumer price index accordingly.

Regarding personal incomes, we have revised the figure upwards. We estimate that people’s incomes will rise by 9.8 percentage points in real terms in 2008. This represents an increase of 0.4 percent compared to our previous forecast. We expect income growth of 9.1 percent in 2009, which is an increase of 0.3 percent on our previous forecast. In 2010, we estimate that incomes will rise by 8 percent. In accordance with these figures we have also revised upwards our estimates concerning wages. We expect wage growth of 12.8 percent in 2007, 10.8 percent in 2008, 8.8 percent in 2009, and 8.2 percent in 2010. This represents an adjustment of from 0.5 to 1.3 percent on average.

Vladimir Putin: Yesterday I looked at some of the results for different sectors and saw that there is clear growth in the banking sector, including regarding capitalisation of the processing sector. Investment growth is continuing at quite a good pace…

Deputy Prime Minister Alexander Zhukov: Capitalisation in the banking sector overall increased by 50 percent last year. This is real progress, as is the fact that lending to the real sector of the economy has increased by around 46 percent. This is an important resource that will make it possible to increase investment, including foreign investment, where we are seeing a significant increase in capital inflow. Last year we had a net capital inflow of $41 billion. This is an important and very significant figure given that previous years have not brought such results. Foreign direct investment in the Russian economy accounts for the greater part of this money. At the same time, we are also seeing growth in domestic investment.

This is fuelling real growth in industrial production and bringing money into sectors that had not had a capital inflow in past years. This is above all true of machine-building plants, where we are seeing significant growth this year.

German Gref: An inflow of $12 billion over the first quarter.

Alexander Zhukov: In other words, we are maintaining the trend. If we build on these results and maintain the current pace, we could have results even higher than those of last year.

Vladimir Putin: German Oskarovich [Gref] noted last time that the national currency is continuing to strengthen, and this is something that we can all see. We need to give this matter particular attention in order not to undermine the positive growth trends you have just mentioned in the processing and manufacturing sectors.

Foreign Minister Sergei Lavrov on the results of his visits to Armenia and Turkmenistan

Sergei Lavrov: On your instructions, I visited Armenia and Turkmenistan. In Armenia I met with President Robert Kocharian, who is very happy with the way the agreements he reached with you at the beginning of this year are being implemented, above all in the trade and economic sector, but also regarding political cooperation, including in the CIS and the Collective Security Treaty Organisation (CSTO). My colleague and I worked on coordinating preparations for the meeting of the CIS Council of Foreign Ministers, which will take place in Astana this month. Our Armenian colleagues were particularly happy with our plans to take an active part in monitoring the parliamentary election that will take place in Armenia in May. In Turkmenistan, the new President, Mr Berdymukhammedov, reaffirmed his country’s commitment to all our energy cooperation plans and to building on the talks that he had with [Russian Prime Minister] Mikhail Yefimovich Fradkov in Ashgabat in February. He also confirmed his interest in diversifying our trade and economic cooperation.

We signed a cooperation programme between the Foreign Ministries of Russia and Turkmenistan covering, among other issues, consultations on developing cooperation in the Caspian Sea, resolving the issue of the Caspian’s status, and cooperation in the United Nations, Organisation for Security and Cooperation in Europe and other international organisations. The President of Turkmenistan hopes to meet with you very soon. We are currently in the process of settling on the date for such a meeting.

First Deputy Prime Minister Sergei Ivanov on his upcoming visit to Armenia and on a meeting of the Military-Industrial Commission to examine the development of aviation arms and defence technology

Sergei Ivanov: I am leaving for Armenia on Wednesday at the invitation of Armenian Prime Minister Serzh Sarkisian. Together with Armenian President Robert Kocharian, we plan to discuss our investment cooperation, the nuclear sector (in connection with the fact that, as you know, Armenia has a nuclear power plant), and the implementation of our gas and energy sector agreements. We will be focusing particularly on the transport infrastructure, above all the Kavkaz-Poti ferry link. A new ferry was purchased just recently. It has already completed its test sailings and will begin sailing this route in the coming days. This ferry can transport around 50 railway wagons, or cisterns, or half-wagons with cargo, or vehicles if wagons are not used. This will finally enable us to organise a reliable and quite high-capacity transport link with Armenia.

I also plan to discuss military and military-technical cooperation matters with the Armenian leadership.

Vladimir Putin: The Military-Industrial Commission is scheduled to hold a meeting tomorrow. And we have a good event taking place at the end of this week: the launch of the new strategic nuclear submarine, Yury Dolgoruky.

Sergei Ivanov: Yes, tomorrow the Military-Industrial Commission will meet to examine the implementation of the state defence procurement programme for 2006. The main item on the agenda, however, will be prospects for developing new aviation arms systems and technology.

This subject stems also from the fact that I was in Komsomolsk-on-Amur last week, at our aircraft construction enterprise there, to monitor the progress on developing not just the Sukhoi-Superjet civilian airplane, but also a fifth-generation military aircraft. We think that the time has come not just to talk about developing a new aircraft (design work is already underway and the programme is going ahead), but also about weapons systems for this aircraft. We will be examining this matter at a meeting of the Military-Industrial Commission tomorrow that will take place behind closed doors. On Sunday, as you mentioned, a happy event is indeed set to take place: the Yury Dolgoruky, the first strategic nuclear submarine in the 955 series, will be launched from the Sevmash Plant’s docks in Severodvinsk. This is the first such submarine we have built in 17 years. After the submarine is launched, it will take about another year to install the technological equipment and weapons systems. Work is underway on two other submarines, Alexander Nevsky and Vladimir Monomakh, and I will monitor the state of progress of work on these vessels. The state defence procurement programme calls for the construction of four such submarines in total. Work has also begun on the construction of a floating nuclear power plant. This is a very promising project being implemented by Rosatom. This power plant will be ready for commissioning in 2010 and will begin operation in Severodvinsk, generating electricity for the entire city. We have plans to build seven such floating nuclear power plants. They can be used effectively in the Far North and the Far East. Some countries, including in southern regions, have already expressed interest in purchasing such power plants.

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