By Oleg Shchedrov
MOSCOW (Reuters) - Russia's enormous currency reserves will allow it to fund economic growth and withstand falling oil prices as more established economies battle a global financial crisis, Prime Minister Vladimir Putin said on Monday.
Putin, addressing an audience of foreign investors, said his government had been prepared for a crisis that caught Western institutions unawares and that emerging economies would drive the global economy despite an increase in capital outflows.
"Our economy is well prepared for external shocks," Putin, who chairs the Foreign Investment Advisory Council, said in an assertive address to an audience including the chief executives of several international companies.
"To a large extent, we can fund economic growth from our internal resources."
Russia holds the world's third-largest gold and foreign exchange reserves, which totalled just over $530 billion (310 billion pounds) as of October 10. The government has already unveiled a $200 billion-plus package to help its economy withstand the financial crisis.
But Russian stocks have been among the worst performers since the crisis took hold, falling over 70 percent from May peaks. Foreign investors have been scared off by shareholder conflicts and a stand-off with the West over war in Georgia.
Putin said capital outflows and inflows had levelled each other in the first nine months of the year. Central bank data shows net inflows of $0.8 billion in the period, although in the third quarter alone net outflows totalled $16.7 billion.
"The liquidity shortage on world markets could result in insufficient inflows to developing countries. This could be reflected in our economy, where there will be a net capital outflow," he said.
"Nevertheless, the BRIC countries will remain the world economy's engines of growth in the next few years," he said, referring to Brazil, Russia, India and China.
CAUGHT UNAWARES
Putin said European, U.S. and British financial bodies, including market watchdogs and ratings agencies, were unprepared for the scale of the global financial crisis.
"We didn't allow ourselves to be caught unawares. We took into account the potential threats," he said.
Russia's economy would remain attractive to foreign investors, Putin said, citing multi-million projects by firms such as Nestle, Renault and Unilever.
Nestle has unveiled plans to spend over $200 million on expanding its instant coffee factory in southern Russia, while Renault moved into Europe's largest car market by purchasing a one-quarter stake in AvtoVAZ, Russia's top car maker.
Putin said Russia's reserve fund would compensate all losses incurred as a result of falling oil prices. Russia, the world's second-largest oil exporter, depends on energy for over half of its budget revenues after boosting output in the last decade.
Oil prices have halved since peaking in July to trade just above $70 a barrel, the level at which Russia has based its 2008 budget calculations.
Putin pledged $7.7 billion of budget funds to widen the remit of the Deposit Insurance Agency, a government body that guarantees retail bank deposits.
Putin said the government would also unveil more measures to support the banking sector and the real economy.
"All the measures we are taking are aimed at creating a long-term financial base," he said.
(Writing by Robin Paxton)
