Only a New Model of Economic Growth Can Make it Possible for Russia’s Economy to Grow at a Higher Pace

On 23 May, RF First Deputy Prime Minister Igor Shuvalov stated that he saw no reasons for Russia's sovereign rating to be revised this year. He also said that ‘a recession so far has posed no threat to the Russian economy ... There is neither crisis nor recession; simply, given the current price of oil, the current rate of economic growth does not satisfy us'.

We find it hard to agree with this statement. As we have repeatedly noted, signs of at least a technical recession have been observed since Q3 2012. Yet another ominous sign is the RF Ministry of Finance's intention to revise upwards its budget deficit projection for 2013 due to the expected loss of revenue. Some serious grounds for expecting a recession to hit Russia's economy emerged quite a long time ago - actually, in the aftermath of the 2008-2009 crisis. We believe that, at present, the Russian economic policy should be aimed at minimizing the dependence of this country's economic growth rate on the behavior of world prices of energy carriers - or, in other words, at making Russia's economy less dependent on raw materials exports.

Also, we believe that the achievement of a specific rate of GDP growth (say, 5 or 6%) should not be regarded as an end in itself. The top priority instead should be given to developing a fundamentally new model of economic growth, primarily based not on a favorable external economic situation but on the diversification of Russia's economy, labor productivity growth and the improvement of human capital quality (as it was noted, in particular, at the 32 May 2013 meeting of the RF Government, devoted to evaluating the results of execution of the 2012 federal budget). In order to achieve this goal, the State should support the ‘social' spheres of economic activity, including education, health care and the pension system. Only a new model of economic growth can make it possible for Russia's economy to grow at a higher pace, and to make that high growth rate sustainable in a long-term perspective.


M. V. Kazakova - Candidate of Economic Sciences, Head of the Economic Development Department