BOFIT Viikkokatsaus / BOFIT Weekly 2019/33

Under a new rule introduced this spring, regional leaders are now evaluated according to 14 different criteria. The main measures of regional economic performance are private-sector job creation, number of small and medium-sized enterprises in the regions and labour productivity.

Russia has a total of 85 federal regions (including the unlawfully annexed territories of Crimea and Sevastopol). Most are led by regional governors. Every region now has specific targets they should meet. The targets are intended to supplement the national investment projects. For example, the annual volume of investment in Moscow and St. Petersburg needs to grow at over 6 % to achieve the national target of a 25 % investment ratio (fixed investment to GDP) by 2024. Regions are also expected by then to halve the number of people living below the poverty line and increase labour productivity by 5 %. Observers have criticised the evaluation criteria released in July for their narrow perspective. Rather than strive for general improvement of economic conditions, leaders must concentrate on boosting readings of specific metrics.

The target regime places trust in the central government (including the president) as the core metric, which shows that political stability and loyalty to central power remain most important. Constitutionally Russia is a federation, but its power structure is actually centralised. Since elections of regional governors were restored in 2012, the Kremlin has effectively diminished regional authority by removing unfavourable governors from office prior to elections and replacing them with favoured candidates whose victory is effectively guaranteed.