HSE St. Petersburg Hosted Presentation of World Bank’s Russia Economic Report
Russia will be able to overcome current economic problems if it adopts a combination of fiscal discipline, regulatory restraint, and institutional capacity building, according to the World Bank, which published Russia Economic Report 34: Balancing Economic Adjustment and Transformation at the end of September. Its main author and World Bank Lead Economist for the Russian Federation, Birgit Hansl, presented the report during a briefing organized by HSE St. Petersburg and American Chamber of Commerce. 30 managers of leading consulting, financial, and recruiting companies, as well as foreign mission and higher education representatives, participated in the event.
Ms. Hansl noted that the Russian economy is still adjusting to geopolitical tensions, sanctions, and falling oil revenues. She illustrated this claim with figures reflecting the state of the economy and the impact these circumstances have had on citizens’ well-being. The expert said that a decrease in real wages of 8.5 per cent in the first half of 2015 has caused a record drop in consumption. Public wages have not grown and pensions have been indexed below the inflation rate. These factors have influenced growth of the poverty rate, which climbed from 13.1 per cent in the first half of 2014 to 15.1 per cent in the first half of 2015.
The report states that Russia is facing a significant and continuous reduction of investment in the private sector. This process began three years ago, but the lack of confidence in the business community, caused by low consumer demand and uncertain policies, has deepened this problem.
The World Bank estimates that terms-of trade losses are likely to amount to 6.9 per cent, causing gross domestic income to fall by 10.7 per cent before the end of the year. On the whole, according to the World Bank’s baseline scenario, the Russian economy will contract by 3.8 per cent in 2015, 0.6 per cent in 2016, and only in 2017 will it see a slight, 1.5 per cent growth.
Ms. Hansl admitted that the free-floating ruble, support of the financial sector and other steps the state government has taken to stabilize the situation have led to some positive results. However, she claimed that in order to overcome economic difficulties Russia should take into account not only current issues, but also long-term tendencies, such as aging of the population and diminishing relative importance of the natural resource sector. She concluded that the country should adopt structural reforms as well as become committed to fiscal and regulatory discipline.
You could find the report here. http://pubdocs.worldbank.org/pubdocs/publicdoc/2015/9/947201443562969282/rer34-eng.pdf