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Russia must change growth model, says business leader

Russia needs to drop its consumption-led growth model behind if it wants its economy to grow, the global chief executive of Russian investment business VTB Capital, told CNBC.

"Long-term, Russia's growth outlook is dependent on structural reforms. Future growth is about investment demand and you need to mobilize private sectors' resources to do this," Alexei Yakovitsky from VTB Capital, a part of the Russian banking group, said on Tuesday.

His comments on growth come a week after the International Monetary Fund (IMF) cut Russia's 2013 growth forecast to 1.5 percent from 2.5 percent. Reducing the country's growth forecasts for the third time this year, the fund also slashed its 2014 forecast, predicting growth of 3 percent rather than the previously expected 3.9 percent.

Although Russia' growth had come in softer than expected so far this year, Yakovitsky expected a pick-up in the remainder of the year and further improvement in 2014.

(Read more: Putin on the Ritz? Russian said to have billions)

"We do expect stronger growth of 3 percent next year on the back of infrastructure investments coming in and we do think the monetary authorities will move towards some kind of monetary loosening to stimulate and propel short-term growth."

With inflation running at 6.3 percent as of September above the Bank of Russia's target of 5-6 percent, however, the central bank has been reluctant to loosen its monetary policy by cutting key interest rates, despite ebbing growth figures.

(Read more: Russia needs to spend oil wealth: Deputy prime minister)

Yakovitsky said the country needed to introduce structural reforms as a consumption-led growth model that Russia had enjoyed for more than a decade was "over."

Speaking to CNBC from Moscow where the group is holding its annual international investment forum, Russia Calling, Yakovitsky's comments come as the world's largest economy could be damaging its own short-term growth prospects.

(Read more: This Man Could Be Russia's Next Leader)

The U.S. government late Monday began its first partial shutdown in 17 years after Republicans and Democrats failed to agree on a spending bill, the result of an impasse that does not bode well for the larger challenge of avoiding a default by raising the U.S. debt ceiling on October 17.

Yakovitsky said investors would be in "wait-and-see" mode in the short-term regarding the U.S. but he didn't believe emerging markets like Russia would suffer over the impasse.

(Read more: Russia's Putin: No magic wand but tricks up our sleeve)

One other factor affecting emerging economies is the prospect of the U.S. Federal Reserve "tapering" its bond-buying program, which has propped up investment in emerging markets like Russia. Yakovtisky said that the unwinding of quantitative easing would only have a negative impact on emerging markets in the short term.

"At some point in the future investors will return to those markets. It will very much depend on the fundamentals of each particular market, be it in Russia, Brazil or China. Obviously the stronger you are internally, the faster investors will return and ultimately it's about growth.

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

Follow us on Twitter: @CNBCWorld

Contact Europe: Economy

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