All scenarios only consider the ways of economy’s survival

A few days ago the Central Bank of Russia submitted to the State Duma a draft guidelines for the single monetary policy, also including Central Bank's updated version of the macroeconomic development projection for 2015-2017.

Unlike a traditional forecast, the projection provides for a great deal of scenarios (five instead of three), which is explained by highly uncertain external factors, primarily global crude oil prices and the sanctions against Russia imposed by developed counties.

The baseline scenario of the forecast provides for lifting of sanctions in 2015 and starts from crude oil prices of $100 per barrel in 2015, which are expected to fall to $90 per barrel by 2017. In 2015-2016, the Russian economy is expected to face a stagnation (a nearly 0.1% growth relative to the preceding period), and downturn will be prevented owing to growth in exports. This will be followed by gradual recovery of the consumer demand and investment, making it possible to reach growth rates of about 1.7% by the end of 2017.

The group of pessimistic scenarios expect crude oil prices to fall from $84-86 per barrel in 2015 to $80 in 2017, resulting in a recession in 2015, while the worst scenario (oil prices down to $60 per barrel ) predicts an economic downturn of 4%. More optimistic scenarios assume that crude oil prices would grow to $105 per barrel, thereby accelerating growth to 2.6% in 2017, and, if sanctions are lifted, even to 3.4% relative to the previous period.

Regretfully, none of the foregoing scenarios contains even a timid effort in accelerating economic growth using new factors (in particular human capital) or strengthening the productivity factor (by undertaking in-depth structural reforms) which have recently been so much talked about.

It can be inferred that all of the scenarios describe only survival methods for the economy in different external market trends, and the key growth factors will remain the same until 2017, namely global crude oil prices, as well as the factor of lifted/not lifted sanctions. The presented options predict no more than 3.4% under the highest GDP growth scenario, provided that crude oil prices are above $100 per barrel.

None of the scenarios provide for domestic sources of growth: the economy is only tuned to external market trends (import substitution and access to new capital markets through partnership with Asian countries). Furthermore, none of the scenarios mentions diversification of the economy towards the production (rather than oil and gas) sector. The foregoing leads to a conclusion that no drastic changes in the economic structure can be expected in the foreseeable future, and all efforts will be focused on searching for means of quite a sluggish sustenance.

Maria Kazakova, Ph.D. in Economics, Deputy Head of International Center for Budget Sustainability Study