Business leaders and government officials from Russia and from abroad can be subjected to harsh political propaganda, gathered on Thursday in the biggest in Russia annual St. Petersburg international economic forum.
In the center organized by President Putin of the beauty contest will be struggling with the Russian economy. He ordered a group of his advisors to present different and competing plans for the strategy of accelerated growth.
At the end of last year, Russia got out of a two-year recession, but growth remains very weak — much lower than required by the Kremlin three percent. And the debate over the competing plans is becoming harder, because Putin wants economic success graced a formality, as his comfortable re-election to the presidency in March next year.
“In the fall, when the President officially decides to run, it uses these materials for its election program,” says economist and former government official Eugene Gontmakher.
Russia’s problems are well known. It depends excessively on the export of oil and gas. She can’t find enough investment to modernize its dilapidated infrastructure. And labour productivity in the country has not kept pace with wage growth, which caused by the aging workforce.
But the debate about addressing these problems gained new relevance due to the fact that Putin failed to fulfill the promises he made at the beginning of his current presidential term. He promised to create millions of high-paying jobs, to raise the level of education and healthcare, and to dramatically increase wages. The recent recession caused a sharp drop in oil prices and Western sanctions, the real incomes of the population decreased significantly.
The Russian government declares that this year the country’s GDP will increase by two percent, and in subsequent years will grow by only half a percent annually. The world Bank this year, forecasts growth of just 1.3 percent and 2018-2019 1.4%.
According to the Kremlin, a grim become a serious problem, because approved this month the strategy of economic security of slow growth, fiscal imbalances and rising income differences are related to security risks.
Putin’s advisers in their proposals demonstrate different ambitions. Putin asked to develop a comprehensive political strategy, and every politician strongly defended his own plan; but Kremlin officials say that the President can approach these measures selectively.
One of the main economic advisers of Putin, Alexei Kudrin argues that it is necessary to modernize the bureaucracy, reform the courts, to reduce government involvement in the economy, drastic reform in education and in the labour market. In its strategy Kudrin foresees far-reaching changes in public administration, and because of this, many believe for political reasons, Putin will refuse to accept it entirely.
The Stolypin club, which is headed by the Commissioner of the Russian President for human entrepreneurs Boris Titov has put forward its proposals, in which there is little policy. But it calls for partial coagulation of the flexible exchange rate system, a less stringent monetary policy and preferential loans. And this casts doubt on key elements of the policy of the Central Bank Director Elvira Nabiullina has the confidence of Putin due to the fact that it is largely thanks to her efforts, the country experienced the shock of falling oil prices and Western sanctions.
Meanwhile, Prime Minister Dmitry Medvedev presented his own program, which analysts are the most realistic and flexible, but least ambitious of the three, as it involves only minor changes in various industries. An important idea of structural reform Medvedev is to reduce employers ‘ contributions for social insurance and to raise the value added tax. This is necessary in order to Russian steel producers more competitive, and the large underground economy out of the shadows.
But Titov warned that the VAT increase will stifle badly needed consumer demand, Kudrin fears that the reduction in employers contributions to the social insurance Fund will complicate the reform of the pension system in Russia.
The government prevents public debate of his plan before the elections, but the Cabinet is moving slowly forward. “They are ready to press the button as soon as elections will be held,” said one informed in this issue the economist.
Director of the Scientific research financial Institute Vladimir Nazarov (the Institute operates under the Ministry of Finance of the Russian Federation) says: “Russia is among the top five countries with the highest level of employers contributions for social insurance.” He points to Germany’s success in enhancing the competitiveness of its exporters that has been achieved by reforms in the labour market and in social welfare. But some experts warn that this plan is unlikely to lead to improved productivity, if Moscow does not make the labor market more flexible.
Titov proposals to improve the investment climate found broad support in the business community and in government circles. But observers say the plan Titova discredited by his ties with presidential adviser Sergei Glazyev, who put forward radical ideas, say, on the complete untethering of the ruble against the dollar.
“Putin in any case will not support such ideas, says an economist at Renaissance Capital Oleg Kuzmin. — Russia has successfully adapted to low oil prices, and this convinced him that the Orthodox macroeconomic policies are working”.
Putin has not yet made a final choice. On Tuesday, his aides presented their competing plans on meeting behind closed doors. But Kudrin and Titov are already public debate. Kudrin mockingly wrote this week that his opponents behave “like medieval alchemists, ready instantly to turn a pile of lead in piles of gold.”
Titov did not remain silent. “Maybe someday, when the conditions themselves will improve and those “institutions”. And now everything will be stolen, or withdraw outside the border. So not now and not here,” he said about the Council Kudrin.
