Russian economy mostly overcame recession

Russian economy mostly overcame recession

Russia's economy mostly overcame the recession, and the economic cycle is close to the lowest point. "Currently, Russian economy is in a state of stagnation. We already see signs of recovery in certain points, which will continue in the medium term," the materials of the Ministry of Economic Development of Russia say, they were prepared for the meeting of the Economic Council under the President, which will be held on Wednesday, May 25th. Reports on economic policy of Stolypin club, the head of the Center for Strategic Research, ex-Finance Minister Alexey Kudrin and Economic Development Minister Alexei Ulyukayev will be presented there. 

The Ministry stresses that it already sees signs of economic recovery, which will continue in the medium term. According to Rosstat, in the first quarter, GDP decline amounted to 1.2%, the Economic Development Ministry forecast a decline of 0.2% over the year. According to the Ministry of Economic Development's data, the potential growth of the Russian economy is at the level of 2% per year, but it can be increased to 4% through effective use of human resources and investments. "Potential growth is now at the level of 2%, and we will return to this trajectory in the next couple of years. However, these growth rates are unacceptable for the Russian economy, since they lead to a reduction of our share in the world economy, the loss of competitiveness and a decline in living standards, compared to most countries," the document notes.

The Ministry of Economic Development also drew attention to the fact that doubling of potential growth is a realistic goal, and it can be achieved through more intensive use of manpower, the accumulation of investments and the increase of performance of these factors. At the same time, the report states that investment policy is the cornerstone of new economic model. The Russian Federation needs growth of investments at the level of 7-8% per year in the coming years. "The optimal ratio between current consumption and investments, based on the maximization of output, according to different models, is in the range of 22-25% of GDP. In order to reach this ratio, investments in the next few years should increase by 7-8% per year, while maintaining the trend of stagnation in the current consumption," TASS quoted the text of the document as saying. 

The Ministry explains that it can be achieved through active investment policy, which is based on "three pillars": creation and maintenance of investment resources, creation of conditions for transformation of savings into investments, stimulation of investment activity through state support mechanisms. 

The Ministry offers to strongly increase the growth of financial support for Russian exports, including significant annual capitalization of Roseximbank, EXIAR and REС.

In addition, the Ministry proposes measures to increase the flexibility of labor legislation, including simplification of dismissal procedures, including those initiated by employer for economic reasons.