Russian economy exhausted growth resource

In view of deteriorating situation in domestic economy, IMF lowered forecasts of Russian GDP growth to 1,5% from с 2,5% in 2013 and to 3% from 3,25% in 2014. Under these deplorable figures experts note that unemployment rate is historically low and capacity utilization has reached pre-crisis level. Among other things, price on hydrocarbon (basis of country’s export) continues to stay on the high level for several years running. Obviously, present growth model has run its course.

Increase of the tax burden with simultaneous build-up of government expenditures is a temporary measure that won’t lead to quality change of situation. On the contrary it will enhance uncertainty in future.

Russian officials are more optimistic in their forecasts. Thus, the head of the Ministry of Economic Development and Trade Alexei Ulyukaev stated that January-September the GDP growth worked out 1,5%, and in the end of year it should be 1,8%. In a panel session of Foreign Investment Advisory Council, which includes the leaders of largest world companies, the Prime Minister of Russia Dmitry Medvedev gave an opinion that in 2013 economy will be up by 2%.

In order to bring the country to other level of technological development and living standards, it is necessary to change corporate style of management, to increase labor efficiency, to encourage investments, to make rules for business maximum transparent and predictable, but not to change legal system every year. It must be admitted that we haven’t got far in solving these problems. Thus, as an example, we should mention a growing investment outflow from the country, which has worked out in monetary terms 48 billion dollars for 9 months of 2013.

We may conclude that the country will continue to drown in the stagnation, the exit from which might be delayed for an indefinite period, if there are no new reforms and no positive signals to business.