Russian economy still has challenges to face, Medvedev says

(Interfax – February 25, 2013)

Prime Minister Dmitry Medvedev said that in order to develop the Russian economy it is necessary to increase the share of revenues from high-tech sectors and raise the standard of living in the country.

Developing high-tech sectors

“There are a number of challenges in the Russian economy to which we have not yet responded. First of all, our economy depends a great deal on resource prices. This is bad. We must diversify it,” Medvedev said in an interview with Cuban media at the end of his visit to Havana.

He said that nearly 50 percent of Russian budget revenues are generated by exports of oil and gas, and while this is an important revenue item, the country has huge scientific and technical potential and good conditions for creating a high-tech economy, an “intelligent economy.”

“We must now take all measures in order to reduce the share of resource sectors in favour of high-tech sectors of industry, including, by the way, processing of resources as well, because it can also be based on the highest technologies,” Medvedev said.

“Simply exporting oil and gas doesn’t bring in such revenues as it may have before,” he said.

Raising living standards

The second challenge is raising living standards in Russia, Medvedev said, adding that the country had come a long way since 1991 but that there were still difficulties in this area.

“We believe that the incomes of a whole range of categories of our citizens do not correspond to today’s level of Russia’s development. These are budget specialists,” Medvedev said.

He recalled that in order to tackle this problem the Russian president and government had made decisions to raise the wages of doctors and teachers at schools and universities.

“We are now working on improving the system of remuneration for these categories, because it is falling behind,” Medvedev said.

There are also problems with providing housing to public sector workers. A great deal of housing is being built, but it is still insufficient to solve this problem, the prime minister said.

“We’re building a lot of housing, we’re building about 70 million square meters per year, but we should really be building more than 100 million, then we’ll be able to solve this problem,” Medvedev said, adding that this housing should not be luxury real estate and should be sold at reasonable prices, in other words that it should low-cost housing.

Dealing with the financial crisis

Speaking about the financial crisis and how it is affecting the Russian economy, he said that a crisis can sometimes serve as an additional shot in the arm for development.

“This is also applicable to our situation. Nobody likes a crisis,” Medvedev said, adding that despite being forced to freeze a number of projects during the financial troubles, Russia carried out all social programs.

“Right now the Russian economy is generally in not bad shape, if it is compared to the situation in the world as a whole, because our economic growth last year was greater than global growth. It was approximately 3.6 percent of GDP,” Medvedev said.

He also commented on inflation figures in the country, remarking that while they are lower in some traditionally strong economies, Russia needs to maintain the level it has achieved.

Medvedev also said Russia has a very low ratio of domestic and foreign debt to GDP, which is an important indicator, since most economies in Europe, as well as the U.S. economy have been unable to make important decisions due to their debt burdens.

In Russia “everything is alright in this sense, I’d even say good,” Medvedev said.