Kudrin names main problems of Russian economy

Kudrin names main problems of Russian economy

Former Russian finance minister Alexei Kudrin has named dependence on energy prices, an aging population, a high share of the state in the real sector and the excessive centralization of the state administration as the main problems of the Russian economy. In his opinion, increased investment in innovations and reorientation to new and promising sectors of the economy can contribute to solving these problems.

"If you solve these problems step by step, our country, with a good plan of action, will be capable of reaching a new rate of growth. Our growth in the coming years is 1-2% of GDP, but we need growth of 5% or more,’’ Kudrin said today at an open lecture at the Northern Arctic Federal University in the framework of the second Week of Financial Literacy for Children and Young People, TASS reports.

The former head of the Russian Finance Ministry said that the dependence of the economy on fluctuations in oil prices is one of the most serious challenges. He predicted that oil prices will not return to the pre-crisis levels of 2014, and in the next two years it could fluctuate at the level of $30-50 per barrel, and did not exclude its decline below $30.

‘’For about two years we are going to have these fluctuations – prices will fall to $30 or below, and then rise to $50 and above. It is an adaptation of the new supply and demand, and this is by taking into account the development of new technologies, and because of the development in the field of alternative fuels," he said.

Another problem is demographic. ‘’The proportion of the working population and retired is significantly changing. In a few years there will be one pensioner for every two people working, and soon one to one. And it will be very difficult to provide a worthy retirement,’’ Alexei Kudrin said, explaining that each year Russia's economically active population falls by about half a million people per year. "This structural problem will drag down growth if we do not increase productivity," he said.

The high proportion of state involvement in the real sector of the economy does not improve the efficiency of companies. However, the decline in its share will be accompanied by an improvement of the legislation and strengthening of financial institutions. Another structural problem is the high centralization of the state administration, Kudrin said.

"Often we wrongly distribute powers, in several areas the role of the regions should be increased. Today we are talking about decentralization and redistribution of the powers at the regional and municipal levels,’’ he said, explaining that it is necessary to engage in stimulating small business development not at the federal level, but at the municipal level.

Kudrin added that these structural problems have been ‘superimposed’ by the anti-Russian sanctions of the US and the European Union and the sharp decline in oil prices, which in turn affected the exchange rate and the capital outflows from the country. The way out of this situation can be economic restructuring, the ex-minister said.

"The modern world has a significant increase in the share of GDP of the service sector, which became centers of innovation in the US share of this sector by 70%, in China – about this,‘’ he said, adding that Russia should re-orient the traditional industries and workers in them to the innovation sector.

Additional support for these structural changes should be provided by the development of the financial system in Russia.

"The problem is that the source of investment, unlike in other countries, is basically the profit of the enterprises – more than half. The development of the financial markets is so weak that it does not constitute the major support share, only a few percent. The tools designed to support new industries, technologies and innovations should be working in a developed financial system,’’ Kudrin said, urging the audience to think about what direction is promising for investments, and those innovations that will turn the life of mankind upside down in the upcoming years.

"From the point of view of genetic research, in 20 years we will have the first immortal human. It sounds unbelievable, but there are such reports We live in an era of serious revolutionary changes,’’ he said.

Another area of ​​changes is medicine. He predicted that in 20 years saving people from diseases that are now deadly will be a normal task due to the development of biotechnology and transplantation.

Another trend that can turn around the life of humanity and bring structural changes in the global economy is the development of alternative energy sources. According to Kudrin, "solar energy will cover all the needs of humanity in energy in 20 years."

The ex-finance minister also predicts a partial lifting of the sanctions against Russia in late 2016 - early 2017.

"I have a feeling that if we consistently fulfill the Minsk agreements, maybe the Syrian situation will positively affect the situation, by the end of the year or early in the next year there will be a partial withdrawal or reduction of the sanctions, That is my prediction,’’ he said.