On 19th April the chair of the Russian Government Dmitry Medvedev presented an annual report to the State Duma, in which he noted that the economy had now entered a growth phase. Experts note his speech was cautiously optimistic, adding that the Government seems to have a pretty clear picture of economic growth and development. Speaking on the Current Affairs. The 25th Hour program, Leonid Grigoriev, chief adviser to the Head of the Analytical Center, confirmed what the prime minister had said, stressing, however, that the growth was probably going to be fairly slow.
The economy is entering slow drama-free growth
Stability in the oil prices ensures a more or less stable budget, Mr. Grigoriev noted. But there are other factors contributing to growth as well. "In 2016 the economy did not fall as much as it had done in the previous 2 years and by the fall of 2016 some economic figures even began to grow. However, additional efforts are needed to achieve faster growth," the expert believes. "And if we begin to accelerate growth, we might be able to return to the 2014 level as early as in 2020."
If Russia managed to get back into the global ratings, this would to some extent make it easier to raise foreign investments, despite the fact that international ratings primarily affect countries under international sanctions. The issue of getting international loans and raising foreign investments is now turning into a question of scale and terms. At the moment, it is difficult to get large long-term money to finance big projects like the North Stream, for example, Mr. Grigoriev explained.
Another issue directly affecting the state of the economy is household income. "Household income fell but it was primarily a result of real household income falling due to inflation. There was no decline in nominal base pay, even though bonuses were often scrapped," Mr. Grigoriev explained. "Our estimates suggest that in 2016 there was a modest 0.5% increase in the real pay that people were earning."
Russia has overcome the crisis and now the economic growth rate is going to depend to a large extent on capital investments, growth in the small and medium sized business sector, modernization, and the weaning of the economy off the oil needle, Mr. Grigoriev summed up.