Vladimir Putin has issued a stark warning that Russia’s economy has only recovered two-thirds of the way to pre-crisis levels. As the country’s heads into an election season, the premier’s comments are the bluntest signal yet that his government is struggling to sustain growth while maintaining key social benefits.
Addressing the International Labor Organization in Geneva on Wednesday, Putin pointed to a “conflict of interest” between businesses and government – and insisted that he has no plans to increase the working week.
“The government, businesses, international political and financial organizations have no right to forget about their fundamental responsibility before citizens, about their social mission,” he said in televised remarks. “This is one of the key lessons of the economic crisis that we need to keep in mind as we work out a long-term development strategy.”
Speaking just days ahead of President Dmitry Medvedev’s address at the International Economic Forum in St. Petersburg, Putin was sending a clear message that he would remain very much in charge of the economy – a stance that observers were likely to interpret as a sign of rivalry ahead of the 2012 presidential elections, analysts said.
And while Putin has prided his government on increasing pensions by some 45 percent during the recovery from the crisis, the message was clear: social programs and spending aren’t going to be scaled back, especially during an election year.
“Some populist remarks are inevitable in a period before the election,” Roland Nash, chief strategist at Verno Capital, told The Moscow News, adding that Putin was still just as focused on reviving the economy.
“There’s still a lot of work to be done. It helps to get that message across,” he said. “The pain that Russia’s feeling now is much less, we’re past any disaster scenario. Now it’s worth focusing on what needs to be done. Businesses are still suffering. The ability to borrow is curtailed.”
But while Putin’s insistence on social programs sometimes runs counter to statements made by key liberals in President Dmitry Medvedev’s camp, experts saw no real contradiction.
“My view is that they are a lot closer than reports would suggest,” Nash said.
Nor is there a contradiction within Putin’s long-term economic strategy, some economists said.
In another remark that suggested Putin planned to remained in charge for many years to come, he outlined Russia’s aims to become one of the top five economies of the world, raising per capita GDP from $19,700 currently to $35,000 by 2020.
“To achieve this, it is necessary to double productivity at the least – and in non-resource based, high-tech sectors, productivity should be tripled or quadrupled,” Putin said.
Putin’s remarks about not increasing the working week were a clarification, not a rebuttal to this spring’s remarks by business tycoon Mikhail Prokhorov in favor of a 60-hour work week, said Alexei Yurtayev, a project coordinator for the Center for Strategic Development – a think tank that advises Putin’s government.
“The problem isn’t that we work too few hours,” Yurtayev told The Moscow News. “The problem is that our workers have very low productivity levels. In eight hours, we produce less than our competitors abroad.”
Putin’s prescription to improve the investment climate involves creating 25 million new jobs by 2025, Yurtayev noted. These industry sector jobs were aiming to boost productivity in the work force and create a demand for innovative technology, he said.
Putin’s comment that Russia’s economy had recovered only two-thirds of the way was seen by experts as a signal of a continuing debate over policy.
“There’s going to be a focus much more now on how to get back to a growth rate to 6 percent,” Peter Westin, chief equity strategist at Aton brokerage, told The Moscow News. “There are structural issues that need to be dealt with. The issue that we come back to all the time is lowering corruption. Because it’s a tax. Under Putin the labor force has increased by 5 per cent, and the number of bureaucrats has increased by 25 percent. Go back to 1999 levels for the number of bureaucrats, and there’s a solution.”