Economic growth should be based on a new model

According to our estimates, GDP growth rate in Russia is approaching its trend or structural (in other words, maximum possible, given the existing production factors) value of approx. 3-4% against the previous year, as is evidenced by a zero value of the output gap which shows percentage of deviation of actual GDP from structural one.

Thus, under the circumstances when the economy is approaching its production limits, stimulating measures, which may be efficient in the short-term period, prove ineffective and cause inflation growth instead of boosting economic growth rates.

To attain higher GDP growth rates, transition to a new, higher level of production capacity, i.e. a new curve of long-term growth, is needed. The existing production factors (labor and production capacities) are not enough for this.

Economic growth should be based on a new model which requires deeper structural reforms (institutional, infrastructural, transport, etc.) aimed at diversifying the Russian economy and making it less dependent on external market conditions, as well as enhancing labor productivity.

Kazakova M. V. – Ph.D. in Economics, Head of Economic Development Department