Investor risk has receded
Prime Minister Vladimir Putin brushed off concerns over steep falls in Russia's stock market and billions of dollars of withdrawn foreign investment, saying the economy was well placed to cope.
Speaking to reporters at his retreat outside the Black Sea resort of Sochi, he dismissed suggestions that Russia's war with Georgia was to blame for declines in shares and the rouble.
"We are part of the global economy and these (movements) relate to the world economy," Putin said.
Russian shares have fallen by more than 40 percent since May. Analysts have pointed to a crisis of confidence among investors rattled by the conflict with Georgia and the treatment meted out to some international companies, most recently oil firm BP.
"We thought we might face a liquidity issue. It is in no way linked to the crisis in the Caucasus," Putin said.
He blamed the housing crisis that began in the United States. "It led to an outflow of speculative capital. Western institutions began to repatriate capital long before the crisis in the Caucasus."
A requirement for firms to pay value added tax at the end of March had also led to a draining of liquidity from Russian financial markets, Putin said.
Nevertheless the Russian economy was sound, he added, forecasting foreign investments would begin flowing again in the second half of the year.
Analysts estimate more than $20 bln has been withdrawn since Russian troops, tanks and warplanes entered Georgia in a five-day war last month.
Putin forecast foreign investment in the region at $45-$50 bln by the end of the year, down from $81 bln in 2007. But that too was a positive, he said, because the reduction would serve to dampen inflation.
"Excess cash is a problem so we're not very sad about the reduced inflow of foreign currency."
"We are still capable of maintaining strong GDP growth."
He also dismissed worries over the recent weakness of Russia's currency. The rouble had been strengthening but since early August it has turned tail and slipped more than 3.5 percent.
"Some movements of the rouble are not critical," Putin said.
His remarks chimed with those of other policy makers in recent days. Finance Minister Alexei Kudrin has suggested political risk in Russia has actually fallen as a result of Moscow's war with Georgia. He argued that previously there was the threat of a conflict but since it had now happened, it would not reoccur.
