Why Russian Economy Stopped Depending on the Oil Prices
Commentary to the publication: Crude Oil Will not Help // Vedomosty, 06.04.2011, 60 (2826)
The Ministry of Economic Development has decided that oil will not be cheaper and upgraded forecast of the average price for this year to a record $ 105 a barrel. But it will not help the economy: GDP forecast has not changed.
The Ministry of Economic Development has decided that oil will not be cheaper and upgraded forecast of the average price for this year to a record $ 105 a barrel. But it will not help the economy: GDP forecast has not changed.
The period of economic growth when Russian GDP went up due to commissioning of available capacities and labor, which did not require serious investment, ended in 2006-2007. Current phase reminds recovery phase in traditional business cycle plus the period of booming global markets of energy resources and raw materials.
Trends, which are characteristic of the Russian economy since mid-2008, are associated with overheating of the economy, when further commissioning of labor and capital in manufacturing becomes inefficient and leads to an inappropriate increase in output (for example, compared with the previous year, 2008 GDP growth amounted to 5.6% against 8.1% in 2007) compared with growth of factors and to acceleration of inflation.
Thus, there is the effect of "bottleneck", when available amounts of effective factors (capital and labor) is insufficient to maintain high economic growth due to imperfect capital markets and inflexible labor market, which cause imbalances in the development of various sectors, reduce the effectiveness of economic development. For the same reason, in our opinion, raising world oil prices do not lead to higher GDP growth rate at the present stage of Russia’s economic development.
М.V. Каzakova – Candidate of Sciences (Economics), Head of Economic Development Department