Putting Russian Economy on a Sustained Path of Growth: Challenges and Solutions
KEY CONCLUSIONS
In order to become one of the world’s five leading countries, Russia’s economic growth must exceed the global average by 6%
“For Russia to remain among the six leading countries of the world, its GDP needs to grow by 3.3%, according RANEPA’s research. To make it into the top five, the growth rate must exceed 6%.” (Alexey Kudrin, Chairman of the Accounts Chamber of the Russian Federation)
“The global economy is now in a place it hasn’t been for the past 10 years. Last year it grew by 3.8%. This year we’re expecting an improvement to 3.9%.” (Christine Lagarde, Managing Director of the International Monetary Fund)
“Indeed, overall we are witnessing a fairly sustainable global economic growth rate of nearly 4%.” (Anton Siluanov, First Deputy Prime Minister of the Russian Federation – Finance Minister of the Russian Federation)
The key prerequisite for accelerating economic growth: increasing investment
“Investment and new cash injections are needed in order to ensure growth rates. It is these indicators which Russia is lagging behind in, when compared to countries with high growth rates. The level of investment in the country is a shade over 21%. In order to grow by around 3%, we need to increase this indicator to at least 25%. It is money from these investors which should help spur a new level of growth.” (Anton Siluanov)
THE PROBLEMS
A slowdown in Russian economic growth
“If we do nothing, then there is a risk that growth could slow to 1%.” (Maxim Oreshkin, Minister of Economic Development of the Russian Federation)
The impact of international sanctions on the Russian economy
“The impact has now increased to 0.5% of GDP.” (Alexey Kudrin)
A shrinking working population and insufficient workforce
“Each year, the working population in Russia declines by between 0.5 and 1 million people. In the coming years there will not be enough specialists to work in the most forward-looking professions.” (Alexey Kudrin)
“If we look at the demographic forecast, the basic scenario is that we stand to lose 3.5 million people in the working population over the next six years. This is a huge challenge. Unemployment in the country has reached record lows, and salaries are increasing at a rate higher than has been the case for many years. All of this suggests that our deficit in the labour market is only set to grow further.” (Maxim Oreshkin)
THE SOLUTIONS
Developing tools to finance infrastructure, and establishing a fund for investment in infrastructure
“Starting in 2019, we shall create a special fund, which, over a six-year period, shall invest significant amounts of government money in this area of the economy – perhaps around 3% of GDP – which will in turn attract the private sector. We suggest using public money to establish this fund. We can attract money from the market, and direct it to investment, which will lead to the creation of additional government assets, and which will work for the economy.” (Anton Siluanov)
“As things stand, I consider the employment of long-term financing tools exclusively for investment in infrastructure to be an entirely justified solution.” (Anton Siluanov)
“When the state takes on operating expenses, nothing good ever comes of it. When working on infrastructure [...] the main prerequisite is that this infrastructure brings about an increase in private investment, and leads to a significant improvement in people’s quality of life.” (Maxim Oreshkin)
“The fact that today we have a low level of sovereign debt by global standards (around 13% of GDP) means we have a large resource. It means that over the coming years we have a reserve which we can use to invest in infrastructure.” (Alexey Kudrin)
“We must understand that state debt investments have a major – and indeed multiplying – effect, given the resulting growth in private investment.” (Elvira Nabiullina, Governor of the Bank of Russia)
Government efforts to create stable conditions for economic growth
“The government must create stable conditions. This primarily relates to taxation. By this, we mean that we will not change the tax system over the next six years. Some specific adjustments are being made. We view our actions in this regard as reducing tax burdens which have a negative effect on business. We are creating a mechanism which would be of interest to entrepreneurs, and encourage them to open up, and operate officially. This will lead to a big contribution to GDP,” (Anton Siluanov)
“We need to half the level of administrative burden experienced by businesses. We should be seeing 1–2 million new entrepreneurs in Russia every year.” (Alexey Kudrin)
Developing the personal pension savings system
“We need to transfer pension savings to the system. This is necessary for two reasons: to ensure retirees are guaranteed a decent pension, and to create long term money.” (Elvira Nabiullina)
“Increasing household savings is a key factor. In order to achieve this, we need to create a mechanism for long-term savings. If, over the next six years, we do not see the appearance in Russia of a strong [...] contributory pension system and life insurance system, then there is of course little point in talking about a significant increase in investment.” (Maxim Oreshkin)
“We need to develop the contributory system to ensure decent pensions, and specifically, voluntary personal pension capital. Such an institution must be established, and it must focus on broadening the pension scheme.” (Anton Siluanov)
Increasing non-commodity exports
“We must double non-commodity exports by 2024 at the latest. We must double the number of Russian companies entering the global market. There needs to be a ‘green channel’ for companies, support, and various forms of fostering support for export. Increasing exports is the main, most comprehensive indicator of an economy’s efficiency.” (Alexey Kudrin)
Increasing public expenditure on healthcare and education
“Changing spending patterns for an entire sector is a crucial step to increasing the efficiency of spending in the system overall, and to improving delivery of results.” (Alexey Kudrin)
For more details go to the Roscongress Foundation Information and Analytical System’s website.
