Government predicts 20 years of stagnation in Russia

Government predicts 20 years of stagnation in Russia

This week, the government and the administration of the Russian president will start uniting the results of work of the Economy ministry and other agencies on the single action plan until 2025, the proposals of the Center for Strategic Research (CSR) until 2024 and, possibly, alternative ideas.

Russian President Vladimir Putin had a working meeting with the country's Prime Minister Dmitry Medvedev to discus prospects for the country’s economic development through 2025. According to the results of the meeting, the basis of the unified economic program of power will be the medium-term plan of action until 2025 worked out by the Economic Ministry under the leadership of the minister Maxim Oreshkin. The proposals of "other expert groups" will be also considered, after which a final decision will be made.

The Ministry of Economy does not consider scenarios with the oil price above $54.8 per barrel (2031-2035).

The scenario demonstrate that there will be no significant transformation of the economy within the next 20 years.

The growth of investment in relation to other sectors will be observed in the first place in the real estate and construction sectors (the growth in the share of total investments from the current 22.4% to 26% in 2017-2020 and 26.7% by 2035) and processing (from the current 11, 4% to 14.7% in 2035), the share of investments in the fuel and energy complex will slowly decline, in transport and communications they will decline more rapidly (from 17.4% to 12.2%). The share of investment in health and education in total investment will decline from 3.4% in 2017-2020 to 2.8% in 2035. The investments will increase in the target scenario at a rate higher than 5% per year.

According to the Ministry of Economy, real wages will grow by 56.5% from 2017 to 2035 with GDP growth for the same period by 78.4%. According to an optimistic scenario, the nominal average wage will be 121 thousand rubles in 2035 (4% inflation). It means an increase in the average wage from $500 to $800 per month and insurance pensions from $200 to $350 by 2035, the Kommersant newspaper writes.

In addition, the forecast emphasizes that the Russian economy's target scenario will reach a peak in GDP growth of 3.6% - in 2028, then slowing to 3.1% in 2035. At the same time, the world economy, as the government believes, will be growing more slowly by this time - 3% per year.

Advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to Vestnik Kavkaza, noted that the government's conservative forecast is rather optimistic. "It is very difficult to reach 3.6% of annual growth, even by 2028. If we look at the main financial indicators, we will see that Russia reached the exhaustion of its growth model by 2013. Shortly thereafter, economic growth was supported by oil prices, but then they also fell," he noted in the first place.

In this regard, first of all, they need a new model of economic growth. "Unfortunately, this problem is far from being solved. There are no viable working alternatives, so a maximum of 3.6% is very optimistic. A more realistic forecast is growth in the range of 1-2%, while any growth less then 3% is de facto stagnation for Russia. I think that we will see the first major changes in the economy next year, not later than autumn, and the forecast will be revised," Sergei Hestanov said.

The expert was skeptical about achieving a 3.4 times increase in labor productivity. "I would say that it's a fantasy. The fact is that it is a very serious task to achieve a productivity growth of at least 1.5 times. In my opinion, there is practically no chance of achieving such an indicator," he warned.

And at the same time, the economist stressed that such forecasts for a 20-year period are necessary for the work of the state. "The government, as a rule, takes its decisions either within the annual budget or, in good times, within a three-year period. Any forecasts for a longer period have greater chances of being unrealized," Sergey Hestanov concluded.