Sergei Hestanov: "Raw materials-based economy model exhausted itself"
On the eve of the St. Petersburg International Economic Forum, the head of the Central Bank of Russia, Elvira Nabiullina, announced the list of global challenges that the Russian economy is currently facing, including a slowdown in global economic growth, the loss of drivers of the growing demand in traditional Russian exports and high risks of volatility in financial markets. Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, told Vestnik Kavkaza about the effect, which these factors will have on the Russian economy in the future.
- The first challenge mentioned by Elvira Nabiullina was a slowdown in global economic growth. In your estimation, to what extent do the really low rates of global growth delay the Russian economic development?
- First of all, most of Russia's economic growth was due to rising commodity prices, which are very much dependent on the global economy's growth rates. As a slowdown in the global economy naturally reduced commodity prices, the Russian economy has begun to experience difficulties. This dependence has developed a long time ago, its first signs can be traced back to the mid-1970s, therefore, Elvira Nabiullina's fears are quite reasonable. The most important thing that the head of the Russian Central Bank drew attention to the need of forming a new model of economic growth. If earlier, practically from the collapse of the Soviet Union, we have developed, basically, due to the recovery of commodity prices, but now this source of growth is largely exhausted, and, as a minimum, we need to come up with a future driver of economic growth. So far it is not even being discussed seriously, either at the government level or in public space. Most likely, such a discussion will begin in the foreseeable future to determine what could significantly push the Russian economy forward instead of increasing commodity prices.
- In your opinion, has the raw materials-based economy model really exhausted itself both in Russia and in the world as a whole, and how soon will we have to abandon this model?
- I absolutely agree with Elvira Nabiullina's point that the raw materials-based economy model has exhausted itself as a whole. But it is worth noting that in the first place we usually think about oilmen, talking about producers of raw materials, although to a large extent, it concerns, among other things, manufacturers of metals and plastics. Most Russian producers of raw materials work in global markets, we compete in global oil, aluminum, steel markets with all other producers of raw materials, and we must understand that the exhaustion of the raw materials-based model concerns not only Russia, but all raw materials producers in general.
- How can the global financial volatility, the third challenge, according to Elvira Nabiullina, threaten Russia?
- Starting with the acute phase of the 2008 crisis, almost all major world central banks aggressively pursued a policy of quantitative easing, roughly speaking, they were printing money. The economy has become accustomed to the conditions of a constant inflow of liquidity, quite cheap money. While now, slowly and gradually, most of the major central banks are moving away from this policy, which causes strong fluctuations in the financial markets. For Russia, of course, the most disturbing thing is that such volatility can contribute to falling commodity prices. This causes the maximum concern, including from the head of the CBR.
- Elvira Nabiullina also noted that the growth potential at the expense of available resources is almost exhausted: unemployment reached the historical low, and capacity use reached the historical high. In this regard, in your opinion, where should we look for reserves for economic growth?
- Alas, there are no simple factors that are accessible for growth, which could quickly and effectively push the Russian economy forward. It is difficult to single out such a factor, which could easily, without large investments, powerfully work for the economic development. Most likely, this factor is to be found, and even discussions about it are yet to come.