Putin plots sweeping infrastructure boost in pre-election economic push

© Reuters. FILE PHOTO: Russian President Vladimir Putin chairs a meeting with government members via a video link in Moscow, Russia November 3, 2022. Sputnik/Mikhail Metzel/Pool via REUTERS/File Photo

By Vladimir Soldatkin, Alexander Marrow and Gleb Stolyarov

MOSCOW (Reuters) – Vladimir Putin outlined sweeping plans on Thursday to revitalise Russia’s infrastructure over the next six years, pledging funds to help enhance the nation’s economic performance just weeks before a presidential election he is sure to win.

Boasting vast natural resources, Russia’s economy rebounded sharply last year from a slump in 2022, but the growth relies heavily on state-funded arms and ammunition production for the war in Ukraine, masking problems that are hampering an improvement in Russians’ living standards.

Addressing lawmakers and other members of Russia’s elite ahead of the March 15-17 presidential election, Putin spoke of a six-year programme reminiscent of the five-year plans first used by Soviet leaders to transform the economy 100 years ago.

“(We must) prepare not only a draft budget for the next three years but also draw up all major spending and investments for the period up to 2030,” he said in a speech that lasted more than two hours and also focused heavily on security issues.

“We need to form a six-year forward-looking financial plan for the country’s development that we will of course supplement with new initiatives.”

Russia, pressured by repeated waves of Western economic sanctions, is contending with a rapid, structural shift as the war in Ukraine enters its third year.

Putin said some regional debts would be written off and more funds would be directed to the regions, including at least 250 billion roubles ($2.75 billion) in annual infrastructure loans.

“Despite the difficult period, despite the current trials and tribulations, we are outlining long-term plans,” he said. “These are the programmes of a strong, sovereign country that looks confidently to the future.”

Putin has long extolled Russia’s economic resilience in the face of sanctions. After contracting 1.2% in 2022, the economy grew 3.6% last year, and is set to outpace all the Group of Seven countries this year.

It has diversified, too, with non-oil and gas budget revenues climbing 25% in 2023.

LABOUR SHORTAGES

Putin said Russia’s economy would soon be among the world’s four largest in terms of purchasing power parity (PPP), but said tackling shortages of qualified personnel and advanced technologies was vital for Moscow to achieve its economic goals.

“We need to be proactive here,” said Putin, who is seeking a further six-year term in next month’s election, adding to his already 24 years as Russia’s paramount leader.

The International Monetary Fund ranks Russia as sixth in terms of gross domestic product based on PPP, behind China, the United States, India, Japan and Germany.

Putin said the pace and quality of Russia’s growth should allow it to become one of the world’s four largest economic powers in the near future.

The IMF said this month, however, that Russia’s war economy faced tough times due to outflows of people and shortages of technology.

Putin said Russia needed to create globally competitive products in the space, nuclear and technology fields and that priority budget funds would be allocated for this.

But with unemployment at a record low 2.9%, productivity growth is a key issue, as outlined this week by First Deputy Prime Minister Andrei Belousov.

The finance ministry, already pressured by soaring military spending demands, will also have to find budgetary funds to meet Putin’s pre-election promises of more generous tax allowances for families with children, part of efforts to address Russia’s low birth rate.

“The most important thing to understand is that all those decisions we heard, all those instructions … will be implemented within the framework of a balanced budget,” Finance Minister Anton Siluanov told state television, without disclosing estimated costs.

($1 = 90.8750 roubles)