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Putin Says Russia Must Avoid Liberal Economic Experiments

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April 20 (Bloomberg) -- Prime Minister Vladimir Putin said Russia must avoid liberal “experiments” to ensure sustainable economic growth as it seeks to become one of the world’s top five economies by 2020.

“The country needs decades of solid, steady growth without going back and forth with ill-thought-out experiments based on often unfounded liberalism and social demagoguery,” Putin, 58, said in a speech to lawmakers today, less than a year before presidential elections in which both he and President Dmitry Medvedev have said they may run.

Russia will fully emerge from the global financial crisis by next year and must double productivity over the next 10 years to achieve its goal of becoming one of the top five economies, Putin said. He also pledged to double production of offensive missiles by 2013, including Iskander-M nuclear-capable weapons.

Putin, a former KGB agent elected president in 2000 and 2004, stepped down in 2008 because of a ban on serving more than two consecutive terms. His hand-picked successor Medvedev, a 45-year-old lawyer who has sought to reduce the government’s role in state companies and attract foreign investment, said April 12 he is nearing a decision on whether to seek re-election. A day later, Putin said it was too early to decide who would run.

Russia’s gross domestic product expanded at an annual rate of 4.4 percent in the first quarter and may grow 4.2 percent this year, Putin said during his address to the State Duma, the lower house of parliament. The inflation rate won’t exceed 7.5 percent and the budget deficit may narrow to between 1 percent and 1.5 percent of GDP this year, he said.

Oil Revenue

Russia’s economy expanded 4 percent in 2010 after suffering the worst recession on record in the wake of the global credit crunch in 2009. Russia posted an average growth rate of almost 7 percent from 1999 to 2008.

Russia will cut foreign borrowing because of revenue the world’s biggest energy exporter receives from higher oil prices, Putin said. Oil has risen 20 percent this year in New York, reaching as high as $109.85 a barrel today, after unrest in the Middle East and North Africa toppled leaders in Egypt and Tunisia and spread to countries including Libya and Syria.

Sovereign debt stands at “slightly above” 10 percent, a level Putin called “acceptable and safe.” Russia is expected to receive 1.1 trillion rubles ($400 billion) of additional income this year from oil and gas and will put most of this into its Reserve Fund, used to safeguard oil revenue, Putin said.

The lesson of the financial crisis is that a country’s inability to deal with external shocks is a threat to national sovereignty, Putin said.

‘Gross Diktat’

“If you are weak, there will be someone who will come and try to push you to follow a certain policy, pick the path to follow for your country in the form of friendly advice that in reality is a gross diktat and interference in the internal affairs of a sovereign state,” he said.

Russia has said it may deploy the Iskander-M in Kaliningrad, a Russian enclave sandwiched between NATO members Lithuania and Poland, to “neutralize” a planned U.S. missile defense system.

Defense spending, which the government plans to increase by two-thirds with an additional 21.5 trillion rubles ($760 billion) through 2020, should be dedicated almost entirely to domestic weaponry to develop Soviet-era strengths in military technology, Putin said.

“This is what we inherited from the Soviet Union, we are proud of it,” he said. “I believe, of course, that the country’s defense budget shouldn’t be spent abroad.”

Russia, whose military has struggled with a lack of financing and development since communism collapsed almost 20 years ago, is seeking to overhaul its armed forces after waging a five-day war with Georgia’s U.S.-trained army in August 2008.

Defense Minister Anatoly Serdyukov said in September that Russia may make its first purchases of U.S. military technology since World War II as it seeks to bolster the armed forces.

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net. Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net.

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