Russia capital outflows pick up pace

[May 16, 2012]  MOSCOW (AP) -- Russia's central bank chief on Wednesday reported that the country saw $42 billion worth of net capital outflows in the first four months of the year, an indication of the scale of investor concern over the Russian economy.

The figure reported by Sergei Ignatyev to the Russian Parliament means the country has already see half of the capital flight posted last year.

Officials last year assured that the outflow would decrease this year as they blamed worries over political instability in Russia linked to the December parliamentary and March presidential elections.

Analysts said investors are withdrawing money from Russia because they are losing faith in economic reforms that Russia badly needs to continue growing.

And Boris Kashin, a member of the Communist party, said growing public discontent with authorities is speeding up the outflow.

"The problem of capital outflow has grown into a political one," he said.

He added that it would persist "if elections keep on being rigged and political opinions are still stifled."

Russian financial officials have assured that Russia would start seeing capital inflows in the second half of the year after the new government is formed. Prime Minister Dmitry Medvedev has submitted candidates for the cabinet to President Vladimir Putin for him to sign on the list of new ministers by the end of the month.

Russia still has economic advantages. Its economy grew by 4.3 percent last year and the country has 1.8 trillion rubles ($58 billion) in a reserve fund, created from oil revenues that the government tucked away when prices were high.

[Associated Press]

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