Russian Daily News Information Service

Russia to face three economic problems, but has bright prospects

Russia should pursue an active industrial policy in order to avoid economic crises and develop in the most balanced way.

Center of Macroeconomic Analysis and Short-term Prognosis has recently released a report titled "Long-term trends of the Russian economy." Economic crises forecast in the report sparked the interest of the press and public. The authors of the report predict three crises which by a curious coincidence should happen at the time of election campaigns.

The document contains a full description of various development trends for the world and Russian economies for the next 10-15 years. It even has figures forecast for four main scenarios.

However, the report can be hardly regarded an economic forecast. It looks more like a manifesto of a group of state-oriented economists and politicians in the Russian government. The group is becoming an influential force in the government. The authors conclude that Russia should pursue an active industrial policy in order to avoid economic crises and develop in the most balanced way. The industrial policy should include large-scale government investments and moderate protectionism in foreign trade.

According to authors of the report, a social crisis will break out in Russia in 2007-2008. The crisis will stem out of public discontent with a high level of inequality. A crisis of infrastructure is expected in Russia in 2011-2012 due to massive decommissioning of infrastructure facilities and housing stock. And, finally, a third crisis will be caused by depletion of some natural resources, which bring about the need for economic restructuring. It is obvious that all those crises can be avoided or minimized by applying a sensible state policy. That is why the picture is not so black as may appear. On the contrary, the report is quite optimistic in terms of Russia's economic development.

The reports consider four scenarios of long-term economic growth. The most optimistic scenario requires an ideal industrial policy pursued by the state. The most pessimistic one becomes a reality provided that the state does nothing. Russia's annual GDP will grow by four-six percent no matter which of the scenarios is in place. The growth rate is probably not enough to double GDP every year. However, the rate is quite solid and sustainable by international standards, it will enable Russia to catch up with the developed nations in the long run. In case of the last scenario, the depletion of natural resources in 2015-2016 will decrease annual growth to one-two percent. However, GDP is not expected to drop sharply due to growth rate decrease.


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