Putin’s state of the nation address: main reasons for economic slowdown are internal

RUSSIA ENERGY / FINANCE - In Brief 12 Dec 2013 by Marcel Salikhov

Today President Putin delivered Russia’s made an annual address to the Federal Assembly. Traditionally the speech covers various topics and includes presidential suggestions to the Government. It was widely expected that major part of the address will cover economy and will include views on stimulating economic growth. While President acknowledged that major reasons for Russian economic slowdown are of internal nature he didn’t lay out a comprehensive view on reforms needed. The proposals were rather technical(like changes in managements structure of Russian scientific fund) or too broad with (like general idea of supporting non-commodity exports or calls to increase productivity of public bodies). Probably the detailed and most contradictory idea on economic topics was proposal to ban to provide credit or state guarantees to companies ‘registered in foreign jurisdictions’ and called for extra taxes on offshore financing. While it’s true that most part of the foreign investments flowing into the country has domestic origin, there are lot of reasons other than just tax optimization like weak property rights and legal uncertainty. Moreover, risks of extra offshore taxation could increase capital outflow in the short run.

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