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Putin Lowers Goals for 2012

The government has backed down from some of its biggest goals from before the economic crisis, acknowledging that the pace of growth will be much more modest and that the residential construction sector will continue to lag.

Prime Minister Vladimir Putin ordered the changes to the government's plan of action through 2012, which was approved by the Cabinet in November 2008. The overall number of projects on the list has fallen to 48, from 60.

Among the casualties were plans to promote Russian culture, to improve public utilities and to make the financial system more stable and liquid. In place of previous projects to restructure the health care system, provide free medical care and lower mortality, the government will seek to preserve and strengthen public health and to develop health care.

Target figures for some projects were also modified. Some of the goals set a year ago are no longer achievable, a government official said. The new indicators, he said, have been approved with the relevant state bodies.

GDP in 2012 will be 0.1 percent lower than in 2008 in real terms, instead of the government's previous expectations of a 28 percent increase. Productivity and per capita income will increase by 3 percent by 2012, rather than by 31 percent and 39 percent, respectively.

The economy's energy intensity — the amount of power used to produce one unit of GDP — will remain unchanged through 2012, rather than the 25 percent decrease targeted last year.

The changes in housing policy were also considerable. Before the crisis, the government wanted 100 million square meters of housing finished annually, but now the figure has been cut to 65 million square meters — slightly above last year's total of 63.8 million.

Even the revised forecasts seem optimistic, said Mikhail Urinson, director of developer ALUR. "The construction rates have fallen too quickly in the affordable housing sector. And it isn't clear that the positive trends will be restored," he said.

The affordable housing market decreased by about 20 percent in 2009, although it should begin to increase next year thanks to state support and renewed lending by banks, said Oleg Repchenko, director of the real estate portal.

"The government has acknowledged that the country will remain dependent on oil," said Yulia Tseplyayeva, chief economist at Merrill Lynch. Before the crisis, officials were saying that with 8 percent GDP growth, the oil and gas sector would account for between 1.5 and 2 percentage points, while the rest would come from domestic demand. "The crisis has proven that domestic demand is dependent on oil prices," she said.

The government did, however, improve some of its targets. The Cabinet is now promising to cut inflation to 5 percent by 2012, down from 7 percent. The government also expects domestic meat producers to increase their market share more than previously anticipated.

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