stream quality and enjoy your favorite. if you're away from your television. with your mobile device you can watch on t.v. anytime anywhere. in welcome to on the money where the business of russia is business i'm peter lavelle as yet economy continues the language in global growth russia's putin warns of a possible recession at home in this year's g.d.p. estimates he has ordered the government into action facing a difficult external environment what does russia need to do to maintain growth. to discuss this i'm joined by vladimir put up of he is the c.e.o. of management so have chicago if he is if economist for russia and c.i.s.

with renaissance capital and we're joined by ben eris he is the editor in chief of business new europe ok this is the first time we've seen this in years mr putin is getting a little nervous about the economy because he had good reason to. it stalled growth stops in the we haven't seen this for nearly a decade in two thousand when he took over the economy and he's been running at you know between six eight percent since and then the growth is going to be nothing so they're very worried a bit of a shock to the system. but i mean you know those. indicators are the key marker in the kit of this show with some slowdown in the economy and it's really a function recession. if you look at the summit for the first quarter g.d.p. by one to one point one percent that's taken when the real real growth hits can be taken by some sort of factors also some fiscal tighten. which we're done but we

would expect something for these are the numbers to be something something the role to two and of course. well you know actually i think well the economy has indeed slowed down i don't think there is a sense of desperation yes that's why i don't feel that at all exactly exactly and actually i think it was expected the first quarter some would tweak given the fact that last year the first quarter was very strong and actually we were very strong with you know everybody there all prices will were high and. coding if you'd like for that from the two thousand and ten from the two thousand and nine recession but i just wanted to to point out that we expect the economy to strengthen d.c. here as we as you go towards the end of the year so i think this slowdown to see right now is a soft spot that the quarter we will actually overcome as as you go into the end of the year so it's not time to panic yet i think. yeah. probably quite useful in some i was pleased to get that going in russ's needs goes because it's been living off lots of oil revenues in the past and they haven't had to think about efficiency and

productivity and those kind of things and this has been even slower than we were expecting saying observe the first quarter but it's really slowed a lot more than they were expecting and this is push them into going ahead with with breaking the reforms and of course we have to wait to see if this is going to be effective and of course it's going to take years for these things to really prides it has refocused everybody on what needs to be to hear that some short term measures which can be done when we focus on the most reports of little long term measures which should be able to sustain for the groups that i would say increase spending a lot more calm the reforms in financial markets and pushing for which really should stimulate the girl saw the local source which was really you know make make this a very spence into this economy really you know feasible and we'll see but people think about inflation ok i mean what i mean is right but i mean most people don't think about those issues but inflation is not. you know everyone thinks about that

is that is right but we expect inflation to actually go down in the second half of the year as as the harvest will be better so i think in terms of the short term measures that you're talking about number one the central bank should be a little bit more aggressive in cutting rates and i think taking over from ignited the cigs actually what will happen and the second thing that they can do in the short term is probably force the state on enterprises to increase their investment program this is already happening just from this is already happening with oil so i think this is the kind of things they can do. in the very in a very short time if we step back for a second i mean the causes of this twofold one is there's a journalist in europe ok i want to get external factors later because here. which is that russia could do nothing about beholden to what happens in europe and that's going badly so that's putting it and secondly there's the internal things in the two parts of that this is short term things they can do like cut rates increase spending and they have those plans to give the economy a bit of something then further out i mean this comes back to the fundamental

problems with the economy the lack of efficiency the bureaucracy the corruption and these are long term fixes and really mistresses should have made those reforms in two thousand and for the only thing that a fair statement to me. is again just i want to say in the long term it's much more important to focus on the reforms short term that's obvious that small that can be done but would. have been worse. both from the public's response is this an opportunity situation i think it's an opportunity and as you know this is something into been always talking about every time russia comes under pressure under pressure in terms of law all price or more challenging external environment we're always saying this is an opportunity unfortunately unfortunately they haven't been very effective in taking taking these opportunities in the past agreed yes it is so volatile i mean we don't do smooth growth booming at six to eight percent or it's collapsed. you know nine percent contraction in the crisis and this is one of

the perennial problems but i mean that's to do again with the very top heavy structure of the economy very big companies going in the right groove model. because it really has a growth momentum and they just have what they have and they make money out of it and they try and make more money as a bit and then everything goes wrong and it collapses again and you know we missed the sort of you know the german middle stand for small and medium sized enterprises and there hasn't been a sense of like we need to get things going we need money now to do the things we're going to do so we're going to turn to the big companies as the source of that money and not enough attention has been. on building up the small medium sized enterprises which is basically to go with the best way to go i think it's a way to go it's one of the ways to go over so you know attracting the foreign investors into russia to increase in the world in which to work because there's also that i don't want to. get to reduce corruption that's the key long term stop improve the local search for example for example the pension pension reform is very

important for us because if you look at the pension out of smart if you look at a topical bring it on to perform it's probably ninety percent of the fixed income plus postpone infrastructure in the way so something which we wish will drive the growth so that's something which i think the russian government clearly understands and that is on the look it's important because it is it is it easy to reform now under these conditions but i think it's because there's a sense of urgency i fortunately i can say there is a sense of urgency but i should do it he would have made it very clear that you know he's worried ok i mean when he says he's worried it means something i think he's warning but once again listening to him yesterday and he was almost five five five five hour long conversation we would what we do people he didn't strike me as as a person in desperation however what he wanted to do is show that he's in control of the government that i think that's the point probably just the kind of an idea that he wanted to convey but i just wanted to become something something the other guest said. one area where russia could improve

a lot it is in the so-called ease of doing business indicators of the world bank and all the countries by i need something to put in has put forward is a key objective in his presidency he wants russia to be the twentieth the twentieth place in the world by twenty three years for now we all know it's one hundred twelfth so there is still a long way to go but i think the effort to improve the fresh air to get place by two thousand and eighteen which i doubt even if it were yesterday we're going to be companies. i mean events right that you know we have a new president this is putin second bite of the apple and he set off on this one with a much clearer reform agenda focusing on these are doing business to give because like magic the easy things have already been done but you said some of the important things haven't been touched on one of the of the eight factors that go into the one is connecting companies to power a system russia is a huge energy producer it is also the most difficult place in the world to connect

a company to a power supply which is upside down and just fixing that will take russia straight up slightly in the top eighty and it's these issues but this is more of a sort of economic issue it's not a big companies should this fixing that particular problem would make everybody's life easier and you see in the media payback so in that sense a very encouraged that focused on pragmatic goals which are actually judged by an external adjudicates in this case the world bank so the super some discipline so that's very encouraging but you know they still need to do it but i mean what about the average consumer what are they going to be thinking about in this economy for this year for example think consumers so much more focus and. russia was doing what consumers can be all consuming that's not what i'm asking you consumers out there while i know it's low and on what's what's been the basic you know demand which was for for four more years for example consumer consumable with huge the last couple years. it was driven by the calling it was in such much more and more duration with

consumers going more to the same savings patterns and so special what was what would go so the key for if you if you look at the consumer groups and the real terms stores are all for here and there most will go since zero so the key and i was really to turn the call me from being able to remember the consumer which already you know that all of you know consumption penetration i mean the credit penetration of that we moved quite quite quite far from this which will be with other with other countries now we really need to focus more than most months but i definitely do that actually even though we have indeed seen some slowdown in consumption spending in the beginning of the year which corresponds to the kind of figures that we see on the g.d.p. side. a national consumer will always spend he will spend on cars he will spend on one cotton he will travel abroad so i don't know what about russian consumer the next ten years but i definitely agree that we should worry about investment investment and infrastructure investment in roads and i think that world cup event in two thousand and eighteen is going to help

a little bit but is going to help in certain pockets and i think there is a more a need for a more consistent more comprehensive program to increase the level of investment in this economy little bit investment the second half it was about the average consumer. spending like crazy very important means they've been borrowing too much . from the west maybe but the penetration of here is so low i mean people don't have mortgages that ever have credit cards and so they can afford support like you said i mean they're going to spend because they still does most of stuff that they haven't got yet you know that we take for granted you know coffee machines and nice a fridge and better holiday and what have you and that's that's the catch up you know the potential for spending is it remains enormous and this will remain the engine of the growth that underpin everything else and so you're guaranteed of a steady you know drive forward of growth and that's very good for the country and we need to capitalize that and you know when i was first here in ninety three there was nothing and today it's more or less a normal country with some big problems and everybody's course like everyone else

maybe right you are going to jump in here we're going to go to a short break and after that short break we'll continue our discussion on russia's economy. well the british. market. find out what's really happening to the global economy with. no holds barred look at the global financial headlines two kinds of reports.

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the international airport in the very heart of moscow. welcome back to on the money where the business of russia is business i'm peter lavelle to remind you we're talking about russia's economy but before we continue our discussion let's have a look at this report. while the recession is hitting the global economy russia is secured with a safety blanket this spring the i.m.f. has not yet down its estimates for world g.d.p. from three and a half to three point two percent growth deficit in russia is part of this larger worldwide paradigm we can't you demand in the u.s. and europe have hampered oil exports also the prospect of deflation in the euro

zone and the bank crisis in cyprus have added to the negative sentiment thus in the first quarter of this year russian g.d.p. grew by mere one point one percent. as a result the ministry of economic development has upgraded its g.d.p. porque us for twenty three team bringing it down to two point four percent according to russian president but in a full. these are disturbing symptoms at the same time he stressed that the russian economy has good margins of safety. i do not want to dramatize the situation not necessarily the russian economy has a sufficient safety net despite growing volatility on global markets prices on oil and other resources are still rather hard russia has substantial gold and currency reserves its budget reserve funds are a reliable city question and what is most important people's real incomes are not shrinking but are steadily growing many experts are optimistic about the second

half of twenty thirteen among them are analysts from v.t. group they see a chance of fresh an economy rebounding this would in part be zero to a low base effect and slowing inflation investments into the russian market has so far been receding this came ost leads you to risks that related with cyprus and falling commodity prices however legislation aimed at simplifying some procedures is on the way for example paying taxes was already made easier by a simplified eighty procedure and the introduction of electronic services that and similar reforms are bound to pump more foreign money into the economy the ease of doing business index for russia has been recently revisited and upgraded the ministry of economic development adjusted the world bank assessment of doing business special it took into consideration the reforms that were carried out in twenty twelve and twenty thirteen the latest rankings are russia rise six positions

from place one hundred eighteen to place one hundred twelve the ministry has calculated just how many points russia would arise if all the planned reforms had been implemented the theoretical result is impressive russia could already be at forty fourth place but for of legend it puts into his government that's not nearly good enough. what the logging global crisis. ok we heard we heard the word cyprus spain in that report. ricochet effect. and we were hoping things were going to pick up a bit for us to be said in the report the sentiments being depressed and rather than the slow build that we were expecting now everyone's been put on their back foot again i mean one of the problems here i mean we mentioned investments very low but it's probably psychological is due to lack of confidence people don't want to

invest in their businesses because you have my pledge up any second and we had that last summer where we think that suddenly came to help because it was just phantom crisis and the crisis didn't happen but everyone including the government reacted as if it had and then with cyprus just emerges same thing as another setback to confidence and that's one of the big problems until we get some more sort of security looking forward people won't start investing i don't you agree with that because i think we'll be looking at what happened the cyprus situation for a while now it's going to ricochet around. a bit maybe too much attention to cyprus where it really deserves if you look at the cyprus was one one hundredth of the russian economy in terms of people you don't mean that there is there was an unforced haircut that's a very interesting thing what i call theft but anyway you know i can hardly disagree with you but the more the more they can say it's really you know also produced all wrong you know if you do it. once very painful to move forward you

can't really pull you out you know playing with this so it's really you know all the thinks it's low to continue they're still we. kept our control in the we which is which is get them but you know you can hear that almost say with some better news put that still in place so it's a big story but it's very important hope to move forward through europe with other can. if you know from from a purely russia's perspective i don't i don't need to it's a big deal i think the direct macroeconomic effects everybody everybody agreed are going to very minimal but i do also think if you think it makes russians want to save more money in their own country i guess you're referring to the fact that you could see some positives from the story in terms of some of the money that has been deposited there coming back to russia i don't think this is these are the kind of money that would like to come back to russia and i think they'll probably find other avenues to get people to somewhere else but again i'm not so for example of import of baltics but i think the story for russia is not there anymore we cannot affect the defect was by confidence via sentiment and unfortunately it happened at

a point in the psycho when the russian economy will lose already suffering so we just added to the overall gloomy idea about russia overwhelming number one absolute . it's just unfortunate and you know the whole as i said at the beginning the problems external problems are weighing on russia and it's not much they can do i mean if you're going to look like that to me is that i mean countries are the trouble of getting progressively smaller going to greece and then. in the next. video with these things are getting less and less important maybe but it doesn't help the situation the crisis has been going on for four years typically that's the length of the crisis is going to be just they have to deal with it now it's priced in the crisis of in europe i mean it should be some kind of comfort in a way isn't it i mean you know if there is a crisis. it's fully priced because the thing is also you know what's what's the

capital markets you know the situation will not go worse with the group so we know what's the know it's possible the market research for a couple of years but no no no no there's a snare for them if buffers from external shocks as far as russia russia is concerned i'm still all prices are at comfortable levels one hundred dollars i think that is something that the russians should be happy with so if we have. one hundred one hundred are all prices but economies growing at twenty percent you can imagine if all price were at seventy eighty what the gold would have been so i think this provides a kind of a useful buffer also i think there are some other bright bright spots in the world economy the u.s. economy is actually performing better than expected i think that there is this big debate right now in europe about austerity and there are less and less people that are excited about austerity so might see a little bit of a movement in the opposite direction you know what you don't have growth because you need to spend a little bit more money and i think the public debate in europe is moving in that direction which from my perspective is the right direction yeah i mean i agree and

the everyone seems to agree the second half of this year is going to be better than the first and this was just a soft patch and then going into twenty fourteen and hopefully we can see you know i think you could probably argue that we hit the bottom of this crisis sometime last year beginning of this year and we're now looking at a slow growth and as we come out the other side the confidence will build and things will pick up because at the end of the day russia doesn't have all the problems that they do in europe i mean it doesn't have. it has a consumer demand the so there are plenty of credit banking sectors very. soon as the sentiment turns that we can go back to actually concentrating and at the same time we've got a kremlin which is more committed to reform that has been you know anytime in the last five years so these are all positives it's just a question of when they kick in and time should be certain you like their prognosis well i agree with you of the key problem with europe or europe is that would be a big. part of russia and the incremental you know also you saw dollar europe or

the huge what russian did it was all a huge. twenty to thirty or forty basis points from a real g.d.p. growth came from the small the really europe so what's important to keep prices for for energy it's really driving for the really you know the huge growth nobody expected huge growth in europe so if you see european central bank which mean more more. some of the. other another central bank but obviously who help especially with what we've seen with research in the place inflation is used to so it's quite comfortable to try to make some more force one on one and more this will see more so. in the big surprises you know all eyes will be will be in russia russia this year because all who are working on the budget through and i hope to continue again effect on this year because the main the main osi comes from this year but longer term it's always a very right thing to do you know we we much appreciate it the thing that really

are the numbers for this year look for more reforms to get in the pension reforms will help a lot you know but that's what the energy prices when you put your prognosis for this year on oil how are we our forecasts about one hundred. at the same level in the next couple of years but i just wanted to add to what the gentleman said that i think should start adjusting our expectations about how and what the russians new normal will look like in the medium term it's not realistic a march expected to see quarter will be growing by a six seven eight percent before a crisis russia's new normal is four percent four percent are the kind of growth rates that should be consistent we are the world these were where the state of the russian economy is so you know how four percent is something that we should be happy with i think most countries in the world. yeah i mean i think it's one of the big changes here and one of this is of the dimension this budget group which ties

russia's budget spending to previous or prices is a very prudent change is a big change and one of the. tumors and the time when it comes to spending and there has been a real cuts in spending for the first time in nearly a decade and spending was growing twenty forty percent maximum and i think it's this year it's like two three percent and this is where. in the long term this is i mentioned before about the volatility of the growth that you're going to want but this is what the budget we will do it will give some sort of stability to it and so the spending that makes the whole thing a lot more predictable so the numerous slower growth but it's much more stable and it is stable to comply and then this is good for the long term perspective and so the end of the booms we enjoyed in the in the past will become a thing of the past but hopefully we can actually start building something a bit more sundays. out of their last word i wish i could disagree with ben you know they all think you know it was more like look like with the girls like seventy percent small it's like

a bubble where they go something like for you know it's more likely to stay the course which will surely would help to work on the officials have to work on the put the to work on the well the reforms or something else so it's not so bad after all gentlemen we've run out of time many thanks to my guests and thanks to our viewers for watching us here on on the money see you next time and stay with art. today. these are the images. from the streets of canada. operations are.

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