Current trends in the Russian economy leave one looking to the future with pessimism

Sunday, June 26, 2022

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Current trends in the Russian economy leave one looking to the future with pessimism. This is the conclusion, Vremya Novostei notes, that can be drawn from the speeches made by those attending a Democratic Alternative club meeting on the subject: "The Russian Economy: A Pause or Stagnation?" The Russian authorities' political decisions that have proven detrimental to the economy are to blame for slower industrial production and GDP growth, thinks Yevsei Gurvich, head of the Group of Economic Experts. Calculations made by his group show that GDP growth in 2004 (considering favorable economic conditions in the world) could well have reached 9%, whereas the real figure will be only between 6.3% and 6.5%. The main reason is a slowdown in investment. This has happened due to changes to economic policy, which in its present form does not consolidate property rights and fails to screen out ineffective market players by supporting effective ones. Yukos is an example of how property is handled. If Gazprom were to win at an auction selling Yuganskneftegaz, it would mean that a less productive unit had absorbed a more efficient one. "Over the past four years, the oil sector has outpaced GDP, whereas the gas industry fell behind," Mr. Gurvich recalled. "In this way, non-market mechanisms are now at work in the opposite direction to what a market economy requires. So there are no evident grounds for the Russian economy's sustained growth," the expert concluded. Yevgeny Gavrilenkov, Troika Dialog chief economist, also explains the downturn in investments by an increased withdrawal of money from the economy and a greater tax burden. "The withdrawals have been made on such a scale that no capital is left to accumulate in the private financial system, which is acting as a brake on growth," he says. "If the withdrawal mechanism is preserved, next year we may see elements of instability in the financial sphere."

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