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1 Oct, 2008 01:45

Growth targets remain the same as Ministries look for compromise on path

Russia’s Development Strategy through to the year 2020 will be debated on Wednesday as Prime Minister Vladimir Putin meets with ministers. It comes at a trying time for the global financial markets, but with Russia’s sound macroeconomic fundamentals layin

The government believes Russia's economy can become the world's 5th largest – in just over a decade. But that is based on estimates made before the current global financial crisis.  Is it still possible that gross domestic product can be more than doubled to $30 thousand per person? And is it still possible to raise average salaries to almost $3 thousand a month, from the current level of $530?

The ministry of economic development says yes. Deputy Economic Development Minister, Andrey Klepach says those goals remain in place, but the path to them needs to change.

“The unfolding financial crisis does not change the goals of the Russia’s Development Strategy up to 2020. However it does require a new path for developing the economy. The measures which have been taken – and those which we are thrashing out – will allow us to meet the program targets in 2020 as well as targets for the next 3 years.”

Klepach is one of those pushing a policy of extensive state support and the creation of State Corporations.  However there's a rival approach from Russia's Finance ministry, which opposes budget spending, along with VAT cuts and says the private sector must rule.

Evgeny Gavrilenkov from Troika Dialog says the state should resist the temptation to direct the economy.
“Those targets are achievable. The question is how we will achieve them. Whether we’ll rely on state support, state interventions. I wouldn’t call it sate policy, I’d call it state intervention – it’s proper definition. Or we’ll rely mostly on private initiative. If we rely on private initiative with some basic support from the state, such as investments into infrastructure which is desperately needed, then it’s achievable.”

Experts say, the Development Strategy may prove a battleground between the two ministries.  As the ringmaster, Prime Minister Putin has given the opponents another 24 hours to find a compromise.