Capital flight from Russia is expected to double to $70 billion this year, the Central Bank said Tuesday, highlighting investors' concerns about political and economic uncertainty in the country.
The new figure is almost twice the previous estimate that $36 billion would leave Russia. In 2010, about $34 billion was pulled out.
The expected capital outflow this year is equivalent to nearly 5 percent of Russia's GDP, which amounted to 44.9 trillion rubles ($1.5 trillion) last year.
The Central Bank said foreign investors' capital withdrawals have increased sharply due to the global financial turmoil, as they avoid so-called emerging markets in favor of safe havens, such as Treasury bonds of sturdy countries like the U.S. or Germany.
Russians, meanwhile, are investing money elsewhere because of an "unfavorable investment climate" in the country, the Central Bank said in a report to parliament.
A report from the Higher School of Economics, Russia's leading economic college, said last week that the capital flight cannot be reversed without fundamental changes in the Russian economy.
"Capital is fleeing Russia not because things are better elsewhere, but because things are bad here and are probably going to get worse," the report said.
"Things that need to be done are not new: fostering competition, establishing the rule of law, fighting corruption and state racket."
Igor Yurgens, chairman of the influential Institute for Contemporary Development that consulted the Kremlin, said in a recent interview that a heavy state involvement in the economy and unpredictable rules for business often outweighs advantages that come from high oil prices.
Investors "need to be confident in their future, property rights, simple relations with the state" and "predictable tax burden," he said in remarks posted on the Valdai Discussion Club's website.
Analysts say the money is leaving Russia in part because of political uncertainty. Russian President Dmitry Medvedev and Prime Minister Vladimir Putin had refrained from confirming their plans for the March presidential election before Putin suddenly announced his bid in late September.
Sergei Guriev, head of the Moscow-based New Economic School, said that the decision "has not appeased the markets, to put it mildly, and they keep on withdrawing money."
At a recent meeting with chief executives of major global companies, Putin sounded upbeat, predicting a 4 percent growth of the economy and an increase in foreign investment.
Putin said he was aware of the massive capital flight but blamed it on the financial turmoil that affects all emerging markets.
Guriev, who has attended some of Putin's meetings with foreign investors, said he feels that "many foreign investors were disappointed that a lot of the promises he had made have not been carried out."
He also said investors often get "a bad message" since Putin, who is famously late for nearly all of his appointments, routinely make them wait for an hour or two at their meetings.
Some of the investors' disappointment relates to the highly anticipated assets sale.
The government has promised to sell stakes in some of its most lucrative assets, but has been dragging its feet on the plan. Market watchers say that a big privatization could help reverse the capital outflow.
Officials said in September they plan to raise $10 billion from the asset sale next year. They also promised to sell up to 15 percent in the country's largest oil producer, Rosneft, which could raise up to $40 billion by 2014.
But some of the companies listed for privatization have made public their opposition to the sale.