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Mid-term prospects of the Russian economy development and structural reform outcomes under strong budget restrictions

Priority areas of development: economics
2018
The project has been carried out as part of the HSE Program of Fundamental Studies.

The research goal is estimating the mid-term prospects for Russian economy development and structural reform outcomes under strong budget restrictions. 

The goal includes the following tasks:

  • The analysis of the key macroindicators dynamics and qualitative changes in the Russian economy, as well as structural changes in the GDP production and usage accounts,  dynamics of the development and structure of the key economic sectors (household sector, public sector, banking sector, non-financial enterprises), foreign trade, and financial and capital flows with the outside world;

  • Analyzing outside factors and global processes, estimating their influence on the current dynamics and development prospects for the Russian economy;

  • Monitoring of the fiscal, monetary policy and another economic policy directions in Russia, including policy oriented to the economic structure changes; estimating the macroeconomic consequences of the politic decisions, constructing the complex estimates for the public sector efficiency;

  • Estimating the short-term prospects of the Russian economy on the base of the regular interviewing of the specialists on macroeconomic forecasting and using the cyclical indicators system;

  • Developing the economic growth short-term and mid-term scenarios based on the macroeconomic modelling;

  • The analysis of the main economic and financial indicators of Belorussia, Kazakhstan, Ukraine;

  • Preparation of the expert conclusions for the official documents which determine social and economic policy of the Russia in short-term and mid-term prospects.

Methodology:

The analysis is based on the statistical and econometric methods of the data analysis, interviewing of the economic forecasting specialists, and the analysis based on the composite indices system which lead the general economic dynamics of 1-2 quarters, developed in the Development Center Institute.

The mid-term forecasting is based on the multidimensional macroeconomic model used for imitational modelling of the different economic development scenarios, finding the bottlenecks of the Russian economy and estimating the potential efficiency of the public policy measures. The development of the mid-term forecast up to 2021 (including qualitative hypotheses  and results description) was realized by estimating key macroeconomic indicators in view of:

  • Main growth factors

  • GDP structure by income sources

  • Main parameters of the GDP usage accounts

  • Main monetary sector indicators

  • Mainbudget system  indicators with federal budget, regional budgets balance and non-budgetary funds separated.

Empirical base of research

The research includes the statistical, graphical and econometric analysis based on the open data sources provided by Federal State Statistics Service of Russia, Bank of Russia, Ministry of Finance of Russian Federation, Russian Federal Treasury, Federal Tax Service of Russia, Federal Customs Service, and another international and national sources. For the purposes of the research also were used official Forecasts of social and economic development of Russia, Federal budget law project, projects of Guidelines for the Monetary Policy of the Bank of Russia, strategic planning system documents. Also access to IMF sources, World Bank sources and other international scientific publications databases was used.

Results of research

The developed mid-term forecast is based on the preconditions assuming persisting institutional environment and structure of the Russian economy in the mid-term. The forecast expects Urals oil price reduction from $71 per barrel in 2018 to 68 dollars per barrel in 2019 and $63 a barrel in 2021. The main risks for economic growth in the medium term are in 2019: the unfavorable dynamics of oil prices, the transition to a permanent budget rule, the VAT rate increase, the movement of the period of increasing infrastructure investments closer to the end of 2019, the suspension of the reduction in key rate with a corresponding revision of forecasts of its dynamics (affecting GDP with a lag), adaptation to the sanctions imposed in 2018, as well as a slowdown in the growth of exports of goods and services in real terms. Under these conditions, GDP growth will slow down from 1.8% in 2018 to 1.3% in 2019. As the influence of some of the negative factors weakens after 2019, and the first positive effects of the reforms being implemented, economic growth can accelerate to 1.6% in 2020 and 1.9% in 2021, which roughly corresponds to the upper limits of the potential growth rate of Russian GDP with the current structure of the economy and the absence of significant improvements in the investment climate.

Level of implementation,  recommendations on implementation or outcomes of the implementation of the results

Practical importance of the research includes the possibility to use the research findings in preparing regular informational and analytical reports, addressed to interested organizations Commentaries on forecasting social and economic development of Russia, Federal budget Law project, projects of Guidelines for the Monetary Policy of the Bank of Russia, and recommendations addressed to President, the Government and the Bank of Russia. The results can be implemented for informational, expert and analytical support of Government and Bank of Russia on economics and economic policy questions.

Publications:


Smirnov Sergey, Ozyildirim A., Picchetti P. Introduction, in: Business Cycles in BRICS / Ed. by Smirnov Sergey, A. Ozyildirim, P. Picchetti.; Ed. by S. V. Smirnov, A. Ozyildirim, P. Picchetti. Springer, 2019. doi Ch. 1. P. 1-6. doi
Smirnov Sergey, Ozyildirim A., Kershoff G. Measurement, Monitoring, and Forecasting Economic Cycles: BRICS Lessons, in: Business Cycles in BRICS / Ed. by Smirnov Sergey, A. Ozyildirim, P. Picchetti.; Ed. by S. V. Smirnov, A. Ozyildirim, P. Picchetti. Springer, 2019. doi Ch. 29. P. 499-513. doi