Putin’s decrees will not turn a sluggish economy into a leading one

Vedomosti cites the statements of experts, which indicate that by 2024 the Russian economy will not be able to enter the top five in the world, as required by the head of state, Vladimir Putin. Economists are sure that at a GDP growth rate of 1.5-2% per year, the key tasks to combat poverty and build capacity for future development will not be achieved.

In particular, Vedomosti was reminded of important events that have taken place in the Russian economy lately. This is a presidential decree on raising government spending by 8 trillion rubles, a bill to raise the retirement age and a law on raising VAT to 20%.

In the opinion of the Government of the Russian Federation, all these measures should lead to the fact that the Russian economy will accelerate the rate of growth and enter the top five of the world’s largest economies in purchasing power parity in 2024. Thus, the Ministry of Economic Development expects that GDP growth will increase to 3% from 2021.

However, these forecasts surprise many experts who believe that until 2024 the country’s GDP will continue to grow at a rate below 2% per year, and the national currency will continue to become cheaper. It turns out that all the shocks of recent months — just «ripples on the water,» said Deputy Director of the Development Center of the Higher School of Economics Sergei Smirnov. In his opinion, the Russian economy will continue the trajectory of sluggish growth, no radical changes will follow.

Sanctions do not provide an opportunity to predict further than a year, notes the chief economist of Alfa Bank, Natalia Orlova. The best scenario for the government in the conditions of the sanctions regime is to keep GDP growth rates at about 2% per year, says the chief economist of Nordea Bank, Tatiana Evdokimova.

In turn, the experts of the Center for Macroeconomic Analysis and Short-Term Forecasting Dmitry Belousov and Kirill Mikhailenko in the analytical note «On the Targeted Version of the Outlook for the Development of the Russian Economy until 2024» pointed out that the «overstrain» of the budget due to defense spending, infrastructure, social and pension obligations, possibly — funding science and space program in the coming years will hinder the acceleration of economic growth.

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