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Russia Needs to Spend Oil Wealth: Deputy Prime Minister

Russia must do more to foster growth, the country's deputy prime minister told CNBC on Friday, after economic growth eased to just 1.6 percent in the first quarter, the slowest rate since 2009.

"We need to grow more than we are doing so now. With today's oil and gas prices we anticipate 5 percent growth maybe next year or in 2015, but not now unfortunately," Igor Shuvalov said at the St. Petersburg International Economic Forum (SPIEF).

He added that the country needed to spend the oil wealth it had saved over the last couple of decades to boost growth.

"I hope next year we'll invest in infrastructure and production industries in the far east," he said.

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According to Shuvalov, Russia's "huge" dependency on oil and gas revenues, which make up half the budget, needed to change.

The government has faced a widening budget deficit because of slowing growth and lower oil prices. It's also under pressure to spend on education, healthcare, housing and infrastructure, investments that Shuvalov said were necessary. But, he added: "I don't believe in reducing expenditures on, say, defense, to do this."

Shuvalov said that Russia was not going to engage in a "currency war" although it could benefit from a weaker ruble.

"We are only targeting inflation, that is our top priority. I don't think we can do something with the exchange rate. For fiscal and budgetary purposes it would be good if the ruble could be a little bit cheaper but on a domestic level it's not the case that we'll do something to reduce it."

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On negative foreign perception of Russia, Shuvalov said it was the fault of "western media" though Russia could do more to attract foreign investment.

"Frankly, it's a case of the Russian image rather than Russia itself, we need to improve the investment climate and the image of it, they are separate things," he said.

Shuvalov refused to speculate about a leadership change, saying that Alexei Kudrin, the man who is rumored to be a possible replacement for current Prime Minister Dmitry Medvedev, was his friend.

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"I wouldn't like to speculate on his value to the government but he has huge value whether he decides to work inside or outside it. He works outside it now and often criticizes the government."

(View more: What Russia Needs To Grow: Deputy PM)

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt