Russia‘s economy expanded by 2.2 percent in October compared with the previous year. The increase is due to spending on strategic national projects launched by President Vladimir Putin, Finance Minister Anton Siluanov said on Wednesday.
Putin has put 13 projects, ranging from healthcare and education to infrastructure, at the heart of his fourth six-year term that began in 2018. He has ordered the government to try to raise economic growth above the world average by 2025.
“We are launching national projects now … this includes work with business, with (Russian) regions … We already see an impact from this, we see economic growth starting to pick up,” Siluanov told a business forum.
Putin’s plan envisages spending 26 trillion roubles ($406bn), but officials are divided over whether the projects – which will be financed by the state and by private investors – can help boost growth that is projected to be close to a modest one percent this year.
Alexei Kudrin, head of the state Audit Chamber and a former finance minister, known for being an outspoken critic of the government, told the forum the project’s plan might not boost the economy.
The Russian Economy Ministry said an increase in growth in October from two percent in September had exceeded its expectations but was not sustainable, given its “compensational nature” after the sluggish performance of the first half of 2019.
In the third quarter, Russia’s gross domestic product grew by 1.7 percent in year-on-year terms, up from 0.9 percent in the second quarter.
Separately on Wednesday, central bank governor Elvira Nabiullina told Russian legislators she was concerned over slow growth this year and blamed it on a lack of structural reforms.
“Overcoming structural curbs is the most important task for our economy,” she said. Under its mandate, the central bank targets inflation but not economic growth.
Nabiullina also said she saw room to ease monetary policy further after a period in which monetary policy was kept moderately tight to curb inflation.
Andrey Kostin, head of Russia’s second-biggest bank, VTB, told Reuters this week he believed Putin’s national projects could help Russia boost its growth in the same way that United States President Franklin Roosevelt’s “New Deal” helped end the “Great Depression” in the 1930s.
But the key, Kostin said, was to maintain tight control over funds “so they are not stolen” and to give private business flexibility when it comes to making decisions related to co-investing with the state.
Kostin said this should give businesses assurance they would not become a target of possible criminal prosecution for any decisions taken.