Good afternoon, ladies and gentlemen,

It is a pleasure to welcome you here in Moscow. An audience like yours is expecting to hear something new on how to build their business in Russia in the post-crisis period. And I think I have a few things to say on the subject. The government has drawn up a raft of measures to stabilise economic growth and raise it to a new level. But before this is done, we will have to, like the rest of the world's economy, go through several difficult years. This Saturday the IMF and the World Bank are holding a regular annual meeting, and I will attend it. We will discuss a new situation in the global economy.

This year is going to be less successful than originally expected: forecasts for the global economy in the next three years have been too optimistic, too high - by half a percentage point. But this overrating is rather on the positive side; it means expectation of growth, expectation of economic stability. It is true that the global economy will take time to emerge from the crisis, and demand from individual households and private companies will not grow as rapidly. The same seems likely to happen in Russia. We will not have the same system of growth factors as before the crisis, when we had high oil prices, or a massive inflow of capital in anticipation of a stronger rouble and oil prices spike. We will not enjoy the same demand for Russian goods on world markets. The domestic demand for loans and growth of the banks' loan portfolio and loans issued to individuals will not be as high either. Our growth will be more moderate, and more moderate factors will contribute to it.

We are therefore expecting - and have submitted this forecast to Parliament this week - a growth of 4% this year and the same growth in the next three years. Inflation in 2010 in Russia will be the lowest since 1992, or 8%. Our goal is to reduce it to 5.5% in the next three years. This will create a new situation with interest rates. It will also allow the Russian financial sector to compete with outside financial agencies over the price of loans. That will expand and strengthen Russia's financial market.

We had a favourable balance of payments even in 2008, the hardest year. Exports exceeded imports and this has held up to this day. In the next few years we are again planning an external surplus, which will support our currency. In 2008, amid confused market sentiment, Russia lost $130 billion in capital outflows. That happened in just one year, mainly in the fourth quarter of 2008. But the Central Bank, backed by government reserves, successfully coped with those outflows, which were based on devaluation expectations. With the onset of 2009 everything fell into place, and the rouble became entrenched in its new position. At the moment, we are expecting a possible capital outflow, or zero outflow, but most likely there will be some outflow. In the coming years, however, we will have a steady inflow of capital.

The government is counting on foreign direct investments. In 2008, they reached $75 billion, although we still lost $130 billion in speculative capital outflow. That is to say the investors who operate in Russia remained active even in that crisis year. Last year, foreign direct investments totalled $36 billion: a massive drop on the pre-crisis indicator. But as early as this year we believe the figure will exceed $40 billion, and in the next two years we expect to see $50 billion of foreign direct investments in the Russian economy.

In this context, total investment in fixed assets will grow, recording a growth of 3% to 4% at the end of this year, 10% in 2011, and 7.4% in 2013. This forecast is public and available to everyone.

            We will also increase investments in GDP terms, which will amount to 20%. Since that is not enough for rapid future growth, in the next three years the government is planning to create new growth factors for the Russian economy and tap new investment zones. Our current objectives are to modernise the economy and retool basic sectors involving industry, services, the banking sector, transport, telecommunications and agriculture. Here, we are building mechanisms to guarantee stability. The state is prepared to invest in public and private partnerships of all types, in joint programmes, and in infrastructure for large industrial projects. Such programmes are today part of the current draft budget.

The state budget for the next three years is based on a new approach. Its spending will be divided between programmes. The first such interim budget, which covers 39 state programmes, is a three-year document. As much as 97% of the budget is concentrated in these programmes. They are concerned with many objectives, ranging from a better quality of life to modernisation and innovation. Information on them is available to the public. So far, these programmes have only one line devoted to each in the new draft budget, with resources distributed between all. But in the course of the year we will formally endorse these programmes, the government will submit them to the State Duma and invite specialists, experts and businesspeople to discuss them. Every rouble of budget spending will have a specific objective, interim goals, and indicators to watch.

This system of presenting a budget and programmes in it should be a new stage in combating corruption when placing large state contracts. The focus will now be on a clearly defined procedure governing the vetting of expenses. The mechanism for implementing these programmes will depend on an improved contract system and on the liability of customers and contractors involved in the fulfilment of the programmes. This new system is currently in preparation, and we are working with the Ministry of Economic Development on a plan for state purchases that will help fulfil these programmes.

In effect, we have here a new model of state governance, a restructured mechanism of state management in the new post-crisis conditions. The federal budget will invest 3% of GDP in these programmes, as before, making it possible to implement them. Whole industries, such as aviation, shipbuilding, pharmaceuticals, machine tools, electronic devices, etc. will be incentivised.

The crisis has been an acid test for Russia's financial system. The Russian government, like governments in other countries, was able to buttress its financial sector. Like many of my colleagues in the West, I have been reproached that support for the financial sector is still failing to produce results, such as an increase in loans. I would like to mention a few figures illustrating the way our financial system got through the financial crisis. At the beginning of 2008, when Russia was not yet experiencing serious jolts from it, when the crisis was making itself felt only in Western countries, I said that Russia was an island of stability. The crisis hit us later, by the end of 2008. Its key manifestations became apparent at the end of 2008. The population had little if any faith left in the financial sector. It had good reasons after experiencing the 1998 crisis, when all Russia's key banks went bankrupt with a loss of all deposits. This memory played its part in the current crisis.

Within one month, in November 2008, households withdrew 450 billion roubles from the banks, partly converting their holdings into hard currency and partly parking them in other savings instruments. They did not believe that the banks would hold out. But anti-crisis measures worked. They included subordinated loans, new interest rates, subsidised rates for industry, rescheduling of loans issued to big business, and rescheduling of loans taken out by our top companies in the West. Support was extended to 295 enterprises of all forms of ownership and yielded its results. Between January 1, 2008, and September 1, 2010, bank assets rose by 58.3% to reach 30.953 trillion roubles.

All this shows that we were able to weather the crisis. Equity capital of the banks has increased by 71.6% since January 1, 2008, and today stands at 4.5 trillion roubles. Total bank capital likewise grew during the crisis. We also increased the minimum equity, which played its part.

Loans were slower to grow. In 2008, they had posted a 24% growth, and it was not until the year's end that they slowed down. Last year, we kept the loan portfolio in the banking sector intact. It did not grow, but neither did it fall. As of September 1, 2010, it had grown by 5.6%. Public trust was restored. Last year, household deposits rose by 26%. This year, they continued to grow, climbing by 16% since the beginning of the year. In the three years, retail deposits have grown by an aggregate of 69% despite the crisis. These are good indicators and show the way the financial sector survived the crisis.

We are continuing to monitor the situation in the banking sector. The Central Bank has stress-tested some of the banks. We are not going to give wide coverage or publicity to its findings. We know of other countries' experience when publication of stress-test data raised more questions than it answered. But we are in control of the situation in the banking sector, even though we may see some of the weaker banks having their licences withdrawn. But that is up to the regulator, the Central Bank. Weaker banks that have failed to stand up to the test of time should deliver on their commitments and be answerable under procedures established by the law and meeting the requirements of lenders and depositors. I do not believe we will avoid such situations in the future, but we have managed to survive the current crisis without depositors losing their savings.

In the short tem, the government will establish a stricter regulatory regime in the financial sector. I am referring not only to the banking sector, but also to financial services and insurance. The government has decided to set up an International Financial Centre. The name stands for a lot of effort and means an infrastructure required to conduct financial transactions and ensure the stability of financial institutions able to compete with Western counterparts. We should create a competitive sector offering financial instruments useful in modernisation. This must cover both financial resources and financial instruments applicable to modernisation and an innovative economy. The government and lawmakers will have their work cut out to administer these sectors concerned with financial services. The International Financial Centre is, therefore, our combined objective to develop an array of tools for economic modernisation.

The other day I chaired a meeting of the Presidential Council on Financial Markets. We updated the plan for the Centre, taking the crisis into account. Some of its goals and a list of regulatory documents were further detailed and the plan itself was expanded. We also set more precise deadlines, requesting that the basic infrastructure of the financial market be established in the next two to three years.

Another decision made by the Council was to create an ad hoc group to monitor systemic risks on the financial market. This group, to be overseen by Deputy Finance Minister Alexei Savatyugin, will join key ministries in identifying and analysing financial risks in Russia. We will certainly draw on the experience of other countries. Like other nations, Russia will contribute to developing new tools for regulating global financial markets. A set of instruments includes measures to cushion the pro-cyclicity effect of the banking sector, regulate the circulation of off-floor derivatives, make corporate risk control systems more effective, and reduce the dependence on some ratings.

Russia has introduced its own accreditation system for rating agencies. We are now setting higher requirements regarding ratings. Russia will implement a new set of instruments, called Basel-3, to monitor its banking regulations. Their key requirement is that capital adequacy should be just over 10%. Russia achieved it in the early 2000s. In terms of this indicator, we are already on a par with international standards.

A privatisation programme is one of the key measures to support the market. The government has set the task to privatise all major minority stakes in leading state-owned companies: telecommunication company Rostelecom, as well as state transport, oil and aviation companies. At the first stage, we are ready to privatise stakes larger than 50%+ 1 share. In the next five years, we are prepared to sell $10 billion worth of stock a year. This is our financial plan for privatisation. Our goal is not only to back infrastructure development programmes and to guarantee sources to reduce the remaining budget deficit.

Our objective is also to lessen the state's share in these large companies, make the market more competitive, increase tradable stock, and attract capital, foreign and otherwise, into this programme, ensuring an inflow of capital into Russia. We believe its drafting will be soon completed. It will be announced to the public. I have mentioned only some of the programmes we are implementing.

A programme to make state spending more effective, which has already been endorsed by the government, provides for an improvement in all procedures and contract documents in a state order, starting with a defence order and ending with road construction. It presupposes a clearer sharing of responsibility between the state and providers, and a more efficient use of every rouble.

This work should ultimately make it possible to start cutting the state budget deficit, bringing it to zero in 2016. Next year we will take our first major step: we are planning to achieve a 3.5% budget deficit, followed by 3.1% in 2012 and 2.9% in 2013. We will be reducing the deficit all the time and bring it down to zero over the next five years.

Russia's low sovereign debt is another factor underlying the strength of its financial system. Currently, it stands at 10.5% of GDP. By the year's end it will be 11% of GDP. That is considerably less than in leading countries. So we have a firm base for the stability of state finances. And with the programmes I outlined we will obtain a strong impulse for the economy and investments in Russia, for simpler relations with business, and for a more transparent relationship between the state and business. This, I believe, will bring us, in three to four years' time, higher growth rates in an economy that must diversify. That is our objective. I think in the course of today's discussion we will be able to hear and review the fair remarks made by our colleagues.

Thank you.