Putin Duma comments pitch to inflation fight without raising taxes

Russia will overcome the financial crisis and hold on to its position as one of the world's leading economies, according to Prime Minister Vladimir Putin, speaking to the Duma on Monday.

Setting out the government's measures taken so far to deal with the crisis, Prime Minister Putin stressed that the Central Bank's policy of controlled Rouble devaluation has been a vital step in stabilising the economy.

“Uncontrolled devaluation was prevented. A contraction of the national currency is unavoidable in the current conditions. As we had promised, the decrease was smooth, which helped the economy and citizens adapt to the new reality. Despite that , the current rate for the Rouble is definitely improving the competitiveness of Russian producers in foreign , and more importantly, in domestic markets.”

Putin pledged his support for the policies of Finance Minister Alexey Kudrin and Central bank chairman Sergey Ignatiev, indicating that support for the banks will continue. But he warned that companies which receive state help must earn it with increases in efficiency.

And he said that the tax burden on the companies will not increase. Aleksey Moiseev, Head of Fixed Income Research at Renaissance Capital says the Prime Ministers comments were notable for the lack of emphasis on increasing taxes.

“Putin has mentioned that he doesn’t expect corporate tax burden to change in the coming years, and also, important for the Russian people, he did not expect personal income tax to change in the coming years as well. In fact, furthermore, he has spoken against any tax on what he called fat bankers.”

Looking to the future, the Prime Minister outlined the need to control budget spending and in doing so, lower inflation.

“The ministry of economic development has made a forecast under which inflation should be brought down to 8% and that is a serious factor in the fight against rising prices. We'll have to take a look at budget expenses.”

The Prime Minister's speech contained few suprises, and reaction to it is likely to be restrained. The business community is likely to be as pleased to hear more of the same, and relieved that the government thinks the worst of the crisis might be behind it.