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Russian economy slows from EU-US pressure - PM

Published time: September 27, 2013 14:42
Russian Prime Minister Dmitry Medvedev speaks at Sochi International Investment Forum. (RIA Novosti/
Grigoriy Sisoev)

Russian Prime Minister Dmitry Medvedev speaks at Sochi International Investment Forum. (RIA Novosti/ Grigoriy Sisoev)

As Russia’s economy loses steam, Prime Minister Dmitry Medvedev has made an official excuse for the slowdown, saying the contracting EU and US are largely to blame. He says Russia should now build an "intelligent" state focusing on value in the workforce.

“The European economy is teetering on the edge of recession, and has slowed growth in all BRICS countries. The US economy cannot fully recover with high unemployment, and many individual Americans are just beginning to crawl out of debt,” Medvedev wrote in the official address on the state of the economy on Friday, available on the Kremlin's website

In the wake of Europe’s debt crisis, the initially projected 3.3 percent growth for Russia seems to be a lofty goal, and Medvedev conceded the GDP growth rate isn’t likely to exceed 2 percent this year, which is below the world average for the first time since 2009.

Russia has based its GDP calculations on a European revival. Now sustainable growth in Europe is still a few years out, Russia must adapt and find a way to circumvent slow European trade, which accounts for roughly half of Russia’s foreign activity.

The European Central Bank said it expected the bloc’s economy to contract 0.4 percent this year, with Germany, the region's powerhouse, expected to add only 0.4 in 2013. France, the EU's second biggest economy, is projected to grow marginally - by just 0.1 percent.

Medvedev’s remarks come soon after the World Bank , the IMF, and Russia’s Ministry for Economic Development  downgraded Russia’s economic outlook  to 1.8 percent in 2013, a long way off from Russia’s projected 3.3 percent.

At the moment Russia is at crossroads, where it can either emerge a winner or end up a loser. The choice is pretty simple: Russia  may continue to move forward very slowly with a pace close to zero, or it may take a step forward despite the risks, Medvedev said.

The ongoing one offers a historic opportunity for Russia to position itself better in the global arena, Medvedev said.

"The world does not stand still, and global competition will become fiercer than ever. For Russia this may become a historic chance to change its role in the international division of labor. We have certain advantages over other countries in terms of low debt indicators and large reserves," the PM said.

The way out for Russia would be to focus on domestic opportunities, mainly its human capital.

“We must continue to move towards a post-industrial economy and an 'intelligent' state where people are the primary focus," Medvedev said.

“For the most part of the 20th century, despite dramatic events, our country has been one of the most advanced in the world, and in some areas, an undisputed leader,” Medvedev said. “I’m sure Russia can again retake these positions, having made an individual, his intellect, his creative abilities a driving force for social development.”

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