Yevgeny Nadorshin: "Commodity sector can't provide stable growth of Russian economy"
Vestnik Kavkaza prepared a series of interviews with leading Russian economists and politicians supervising economic sector. This time, chief economist at PF Capital, Yevgeny Nadorshin, discussed new American sanctions and post-crisis state of Russian economy.
- How will new American sanctions affect our economy?
- They will make our economy, which is already pretty isolated in terms of technological cooperation and financial markets, even less open. In this regard, they will hurt our development prospects. We can expect that economic growth rate will significantly slow down. Until recently, commodity sector had the most significant growth, some state mega-projects contributed to it, but other segments, with rare exceptions, saw very slow development. But opportunities for growth of commodity sector are extremely limited, moreover, these resources are close to exhaustion, this is clearly visible in oil industry, which, perhaps, won't be able to increase production even by one percent in 2019. Commodities simply can't provide stable growth of Russian economy, not to mention targeted 3-4% per year.
As for non-commodity sector, technological cooperation with foreign partners for exchange of technologies is extremely important for development of this sector. Russia, unfortunately, has always been weak in this, and with expansion of sanctions our weakness will increase. We don't have enough capabilities for full-fledged independent development in all necessary areas. Our cooperation with the world leader in technological sphere will decrease. Washington will create obstacles to everything associated with defense industry, not only when it comes to deliveries directly from the US to Russia, other directions may also be affected, at least those that cooperate with the United States.
Previously imposed sanctions led to the fact that private sector not only in the US, but also in many other countries chose to refrain from technological cooperation with us. Now situation will become even worse. Technological development is a long-term process, and companies, considering intensity of new sanctions simply can't predict what sanctions confrontation will lead to in a year or two. It's known that Russian anti-sanctions very often painfully hurt interests of local economic agents, just like how it happened with food products anti-sanctions, everyone remembers this well. Foreign partners, even if they work on development of virtual reality devices, don't want to be in a situation where they have to guess whether Washington will consider their product a dual-use technology. I'm mentioning VR because our Defense Ministry was interested in training soldiers in virtual reality, such simulators are used in the US, and now it turns out that if a foreign company just creates computer games a joint venture with Russian partner can be considered dual-use technology. Due to this, Americans interested in working with our programmers will rather invite them to California to work on American soil as employees of American company, rather than risk cooperating with Russian legal entities and then spend time and money on avoiding sanctions.
- How will planned sanctions against assets of Russian banks affect our financial system?
- They will slow economic growth. In order to neutralize or at least reduce effects of restrictions on operations of our banks, it will be necessary to make a lot of efforts, and, of course, it won't be free. In addition, although draft sanctions stipulate that they are introduced only against one or more banks from the list, everyone will have to prepare for them, not only banks, but also the state. People will begin to transfer dollar deposits from Sberbank, VTB and other banks to avoid consequences of sanctions war. We will see results of these sanctions in the coming months, in August-September statistics, we will see results of what is happening in financial markets.
By the way, in the long-term Sberbank will begin to be pressured by technological sanctions, since they won't allow it to produce its products, make it unprofitable to introduce new technologies, will make it more profitable for development teams to go to the West. All of this will also slow down growth of our economy. In the end, I think, in the second half of this year, we will see worsening dynamics. I don't expect recession, but there's a high probability that in 1.5 years growth rate won't exceed 1%.
- Another important topic for our economy is government's summer reforms. In your opinion, what will the effect of the Finance Ministry's tax raise be?
- Finance Ministry's decision to raise taxes will only slowdown the economy. I don't think that inflation will increase after the VAT increases, but its growth will lead to the fact that many companies in markets where demand doesn't grow dynamically will face serious difficulties and some won't be able to withstand the competition. Previously, such enterprises somehow survived, and now, due to 20% VAT, growth of business costs will force them to close, go bankrupt. Of course, the VAT is a very well administered tax, it's easy to collect it, tax authorities noticed this long time ago and in recent years actively used it, suffocating business in a way.