It Is Impossible to Instantaneously Catch Up with the Global Economic Growth Rate

In his annual Presidential Address to the Federal Assembly, RF President Vladimir Putin said that the Russian economy should aim at achieving an above-average global growth rate which would, within the next three to four years, make it possible for Russia to escape from the 'trap of zero-level growth'.

According to Mr. Putin, in spite of the tense geopolitical situation (the economic sanctions imposed on Russia, a drop in oil prices, etc.) and the bleak domestic economic outlook (the absence of some fundamental factors capable of contributing to economic growth, an unfavorable investment climate, etc.), Russia has everything she needs to achieve this aim, including natural resources, money, human capital, and a considerable scientific potential.

It is hard to disagree with the President's statement that time has come for the Russian economy to immediately switch over to a new model of economic growth, based not on the export of raw materials but on developed industry, progressive technologies, competitive production, a stable financial system, and developed institutions. Seen under this perspective, the declining price of oil ceases to be a factor hampering the economic reforms designed to develop the economy and to reduce the importance of the oil and gas sector.

Nevertheless, we believe that it would be unrealistic to expect that an above-average global growth rate can indeed be achieved within the next three to four years. According to data released by the IMF, global growth will average 3.3% in 2014. At the same time, according to the latest estimates, the growth rate of Russia's GDP in 2014 will amount to 0.5-0.6%, and it is expected that in 2015 the Russian economy will decline by 0.7-0.8% (or will manage zero growth at best).

Therefore, in our opinion, it would be better to lengthen the timeframe for the proposed measures designed to increase the rate of Russia's economic growth. The tasks of increasing the investment attractiveness of the Russian economy, creating a favorable environment for Russia's citizens, developing new technologies, improving the quality of human capital, etc. will inevitably take some considerable time to be accomplished. No great leap forward should ever be attempted in this regard. Any such attempt would be futile. Bearing in mind the existing difficult situation and the fact that Russia lags behind the developed nations by several decades, one can confidently assume that it will take many years for Russia to achieve the high growth rates that will bring her economy to a quantitatively new level.

Maria Kazakova – Candidate of Economic Sciences, Deputy Head of the International Budget Sustainability Department of the Gaidar Institute