June 1, 22:44 (UTC+3)

Macroeconomic policy: from stabilisation to growth

CHALLENGES:

  • Economic stagnation

“For the next three years, the economy (GDP) is forecast to expand at the base low rate of 1.5% per year. We have been following an adverse trend that is still preventing us from achieving better growth,” said Alexey Kudrin, Chairman of the Board, Centre for Strategic Research Foundation.

  • Lower budget income

“Over the last seven years, the income has dropped by 7% of the GDP, which has dealt a big blow to the fiscal system. The Ministry of Finance predicts a further decline of 2% of the GDP in the next three years. <...> This sets off the Ministry’s provisions on spending cuts <...> of some RUB 1.8 trillion, which will have to come from the public sector, roads and education,” said Alexey Kudrin.

  • Excessive government regulation

“In the span of 2003–2017, the number of government functions doubled due to the challenges that came with the technological revolution and increased efficiency. At some point, the law of diminishing returns set in. <...> The scale of various checks and regulations became unreasonable,” said Alexey Kudrin.

SOLUTIONS:

  • Cultivation of stable environment

“We need to create a transparent and predictable government in all areas: taxes, tariffs, supervision, procurement, subsidies. Such an environment would ensure lower risks for the business and, consequently, more investment,” said Maxim Oreshkin, Minister of Economic Development of the Russian Federation.

“The focus should be on establishing long-term stability of the fiscal system. Once we stop borrowing so much and squandering the reserves, and once we balance the budget – then we will be able to develop a stable financial, fiscal and economic policy,” said Anton Siluanov, Finance Minister of the Russian Federation.

“We aim to maintain a low inflation rate in the mid-term, <...> which will result in lower interest rates and better credit availability. Most importantly, it will allow for an increased planning horizon, ensuring greater investment and competitiveness,” said Elvira Nabiullina, Governor, Central Bank of the Russian Federation.

  • Privatisation of state companies and expansion of the private sector

“We need to expand the private sector, which is more responsive to any change. <...> The entire oil sector needs to be privatised in the next 6–8 years. For these companies, state ownership does more harm than good,” said Alexey Kudrin.

  • Improvement of productivity and new technologies

“Labour productivity is a top priority for Russia. <...> The Government needs to stimulate business innovations and make use of scientific advancements when it comes to production,” said Kristalina Georgieva, Chief Executive Officer, World Bank Group.

“The focus areas are logistics, trade, accounting and reporting and everything that has to do with government relations. This is where new technologies will have the most effect, cutting business expenses and boosting returns on investment projects and hence expanding investment,” said Maxim Oreshkin.

“We need to foster science, innovation and entrepreneurship in technology through facilitation and investment <...>, by creating and subsidising R&D consortia and partnerships with the Government,” said Alexey Kudrin.

  • Increasing exports

“Our task is not only to make a competitive product, but also to market it. <...> We need to double non-commodity exports <...>, to set up institutions that would promote our products in the global markets,” said Alexey Kudrin.

  • Expanding investment in infrastructure

“What we need is to step up investment by RUB 5 trillion annually <...> The financing channels need further development, so we are now working to incentivise investment in the infrastructure and greenfield projects that will be a driver for the economy,” said Maxim Oreshkin.

“We should focus on those areas that are not working and have the greatest upside potential. Logistics, for example, which ranks 99th now,” said Kristalina Georgieva.

“The government should invest less in state-owned companies through subsidies and channel those funds into infrastructure. We suggest that the related expenses be expanded by 0.8%,” said Alexey Kudrin.

“We are not using private capital in infrastructure projects to the extent we could. We are just going to embark on a programme to boost private investment in the infrastructure,” said Maxim Oreshkin.

  • Investing in human capital

“We need to get people ready for the rapidly changing environment,” said Kristalina Georgieva.

“We need to step up expenses on human capital. <...> But we are talking here not just about money <...>, but also about the skill and performance of those who teach or treat people,” said Anton Siluanov.

“One of our tasks is to reduce structural unemployment and expand the economically active population <...> We need to focus on youth where we have rather high structural unemployment, to facilitate their entry into the labour market,” said Maxim Oreshkin.

  • Improving performance of government programmes

“We need clear goals, clear division of all the programmes into process and project components; we need to know how much they cost and what they contribute to our goals in a particular sector. We need to prioritise them according to the cost-benefit ratio <...> and finance those that would help us achieve more,” said Maxim Oreshkin.