BOFIT Viikkokatsaus / BOFIT Weekly 2019/04

At the annual mega-get-together for economic discussions last week, economy minister Maxim Oreshkin noted that Russian economic growth will not be driven by global growth but will rather depend on domestic measures and fixed investments. The ministry’s forecast expects GDP growth to accelerate from its current pace of around 1.5 % to over 3 % in 2021, if investment growth picks up to over 7 %. The economist panel at the forum saw that the fixed investments would have to come especially from private firms. They were assessed to account for about 70 % of investments. The panel included outlooks anticipating GDP growth of some 1.5−2 % for the next few years.

Alexei Kudrin, Russia’s finance minister throughout the 2000s and currently chairman of the Accounts Chamber, said that it would be extremely difficult to achieve growth above 3 %. He noted that the outlook for domestic demand was insufficient for that and stressed the need to improve the export capabilities of Russian industries. He further emphasised the need to improve business market confidence through systemic reforms such as reforming public administration, reducing the role of the government in the economy and the burden on firms caused by officials’ actions as well as devolving own authority to regional administrations.

Kudrin said that such reforms are not included in the national projects launched, thus denoting that the projects will not be enough to reach the country’s growth and investment goals (the 13 national projects cover areas such as infrastructure, productivity, education and health care). Kudrin pointed out the high complexity of administrative structures for national projects, programmes and target plans. In addition, finance minister Anton Siluanov noted the need to coordinate state projects at the federal and regional levels, pointing out that over half of the tasks included in the national projects is in the competence given to regional and local authorities. An amount equivalent to nearly 4 % of GDP will be channelled to national projects during 2019−2024. Of that amount, over one quarter is additional funding for projects set forth in president Putin’s May inauguration Decree.