Russia now in extremely difficult economic condition, but could use this for reform - Shuvalov

The Russian economy is currently in extremely difficult economic condition, and Russia's problems should not be underestimated, Russian First Deputy Prime Minister Igor Shuvalov said at Sberbank's business breakfast at the Davos forum.

The Russian economy is currently in extremely difficult economic condition, and Russia's problems should not be underestimated, Russian First Deputy Prime Minister Igor Shuvalov said at Sberbank's business breakfast at the Davos forum.

"Russia is currently in an extremely difficult situation. Our economic situation isn't good," he said. There are different development scenarios for the future; the situation might worsen or, like in 2009, prices for Russian exports might turn around and grow, but this does not eliminate the deep structural problems in the economy, Shuvalov said, adding that there was still no reason to panic.

"The Russian economy's trouble is that the modernization agenda that came about thanks to the 2008 crisis was quickly wiped out by increased oil prices," he said.

"This agenda started to change rapidly. In 2011-2012 many started thinking that everything was fine and that the crisis had formally ended. But actually we didn't get over any crisis," Shuvalov added.

"In reality, we didn't come out of the crisis, instead moving into another afterwards, even before the events in Ukraine. And it became clear that this is a structural crisis, and here it is. Then the sanctions agenda came about. This is all very unpleasant, of course. But I look at it this way: maybe this is yet another chance that Russia mustn't pass up," he said.

"In a decade we'll be able to evaluate whether Russia was able to use this opportunity," Shuvalov added.

In order to develop, the economy needs investments, but this has been complicated by geopolitical factors, he said. The Russian authorities have to prepare for a scenario of the long-term foreign restrictions that countries like South Africa or Chile had to go through.

"I don't think politicians have the possibility of rapidly resolving the Ukrainian crisis. I see this as someone who has to consider even the worst scenario. Investors will nonetheless look at real gains. We have experience, like with how South Africa developed under sanctions or how Chile developed in difficult conditions. Is it possible to create a modern economic system amid political difficulties? The answer - it is," Shuvalov added.

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