Gaidar Forum experts discuss sustainable economic growth in Russia and the world
The new trajectory of Russia’s sustainable economic growth was the subject of discussion on January 17, the second day of the Ninth Gaidar Forum, Russia and the World: Values and Virtues.
The moderator, Rector of the Russian Foreign Trade Academy Sergei Sinelnikov-Murylev, noted that in 2017, the Russian economy returned to positive GDP growth rates after two years of decline. The world economy grew by an estimated 3.6%-3.7% last year, which was close to the levels of global growth in the prosperous 2000s. After that he proposed a brief electronic vote on whether Russia and the world have recovered from the recession by now.
Speaking about Russia’s economic growth, Minister of Economic Development Maxim Oreshkin said that 2017 was the year Russia completed its successful macroeconomic policy reform. The expert pointed out a favorable situation on the Russian foreign exchange market and good inflation figures. “Three years ago, when we had inflation at 15%, we met here in this room to discuss the problems that faced the Russian economy. I think at the time, with inflation at 15%, no one would have believed that in January 2018, our main concern would be whether it is a good or a bad thing that inflation is 1.5% away from the 4% target,” the speaker said.
“Inflationary targeting, a floating exchange rate, the budget rule and a mechanism for protecting the domestic economy from oil price fluctuations are the four things that have radically changed the conditions in which the Russian economy operates,” the minister added.
Central Bank Governor Elvira Nabiullina also noted positive changes in the economic sphere: “The Russian economy has become more resistant to shocks, less vulnerable to falls and changes in oil prices.” Nevertheless, the strong dependence on the oil and gas sector of the Russian economy still persists. “The economy will grow in the range of 1.5-2% - the potential growth rate with the current economic structure and the current institutions. In a sense, we are now at a turning point,” Nabiullina said. Speaking about the inflation, she noted: “Low inflation is not the result of luck or a happy coincidence, but rather the result of consistent implementing of specific policies.”
Answering the moderator’s question about the budget rule, Finance Minister Anton Siluanov noted that this budgeting mechanism, which determines the maximum level of spending on the basis of oil prices, was created not only to keep the reserves and form a safety cushion for the budget, but also for predictability. “This way, investors know that however dramatically oil prices change, the rate will change more smoothly,” the Finance Minister explained. “This is what allows us to talk about the sustainability of the key macro indicators we need to ensure as basic conditions for further growth. If the situation continues as it is today, we will have a surplus,” he added.
President of the Center for Strategic Research Pavel Kadochnikov also noted positive changes in the Russian economy, including investment growth, lower interest rates, growth in exports, primarily non-commodity ones, lower inflation, macroeconomic stability and a revival of the business cycle.
Chairman of Renova Group, President of Skolkovo Foundation Viktor Vekselberg said that, even though the Russian economy is growing now, it is not homogeneous across the industries. He also noted the difficulties faced by business in Russia: problems with access to long-term financial resources and a general distrust of the state towards business.
World Bank Chief Executive Officer Kristalina Georgieva noted improvements in the investment climate in Russia. In her speech, she also touched upon inflation: “It is very important that inflation is predictable and inflation expectations are in line with reality.” “Our policy is to keep inflation close to 4% and to minimize any deviations from 4%, up or down,” Elvira Nabiullina said, adding that the Russian economy believes in the stability of low inflation.
The experts further discussed the role of human capital in Russia’s economic development.
“All policies should be centered on the individual, the productivity of labor and human capital, which should be a real priority. We can only assert that something is a priority when it is reflected in the budget,” Pavel Kadochnikov added. “We are talking about the quality of people’s lives, because we can see that every next round of economic development and change in the way of life increases the role of the individual. Therefore, high living standards are a key factor for the economy to evolve and change and grow, so that the best and most talented stay home,” Maxim Oreshkin added.
The participants also discussed tax administration, possible models for further economic growth, conditions for successful implementation of the development program and revival of the financial system. They agreed that it is necessary to support economic growth and make every effort in the short and medium term to avoid a new slowdown, in particular, to increase labor productivity in public administration and increase the financial system’s flexibility.
Summarizing the meeting, Sergei Sinelnikov-Murylev announced the results of the vote from the beginning of the discussion. Most forum guests agreed that the world has emerged from the financial crisis; but not Russia. More than 50% of respondents chose this option.
The organizers include the Presidential Academy of National Economy and Public Administration (RANEPA), the Gaidar Institute for Economic Policy (Gaidar Institute) and the Association of Innovative Regions of Russia (AIRR).
The program outline is available at the forum website.
Participation is free; preliminary registration is required.
The general partners of the Gaidar Forum are Gazprom and Gazprombank; strategic partners include Novartis, Johnson&Johnson, RZD, MSD, AstraZeneca, the ACIG Group of Companies, Mastercard, Coca-Cola, Russian Agricultural Bank, Pharmstandard JSC, Microsoft; O1 Group, Unilever, EY, Russian Brewers’ Union, Russian Direct Investment Fund are partners and RVC.
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