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Home News Putin admits Russia has itself to blame for economic woes

Putin admits Russia has itself to blame for economic woes

Published on 12/12/2013

Russian President Vladimir Putin on Thursday admitted Russia had only itself to blame for its current economic slowdown, saying the energy-rich country had to find "new factors" to dynamise its sluggish growth.

With the budget now in need of new sources of income, Putin proposed that Russian offshore companies should be obliged to pay taxes into the Russian treasury.

In his annual state of the nation address, which came amid an economic slump which the government predicts will see growth of just 1.4 percent this year, Putin departed from the usual rhetoric of blaming outside cyclical factors for economic trouble.

“Yes of course, we are experiencing the consequences of the economic crisis. But we need to say frankly that the main consequences for the slowdown in growth are not of external but internal character,” he said inside the Kremlin.

Analysts have said that Putin’s failure to reform the economy during his dominance of Russia has left the economy facing low growth in the next few years as it remains reliant on energy exports.

“On a key indicator like labour productivity, we lag behind leading countries by two or three times. We need to overcome this gap,” Putin said.

“We need to activate new factors of development,” he said.

Putin complained that according to experts’ estimates last year $111 billion in Russian goods — one fifth of its exports — and half of Russia’s $50 billion of investment abroad had gone through offshores.

He said that in the future, companies with Russian owners but registered abroad would have to pay taxes into the Russian budget and the government would have to create a system to implement this.

“You want to have an offshore, you are welcome. But pay the money here,” Putin warned. Russian companies are notorious for their practice of registering abroad and using tax havens like Cyprus to avoid taxes at home.