Factors determining Russia’s long-term growth rate

Abstract

In the decade of the 2010s, the pace of economic growth in Russia slowed down to an annual rate of below 2% and most forecasts suggest that this is will be the new “normal” for the Russian economy at least in the medium-term. While politically and socially disappointing, such a growth slowdown is unavoidable due to adverse demographic trends. A combination of a shrinking working-age population and population aging must lead to a lower growth pace as compared to the period when the working-age population was still increasing and the effects of population aging were limited (the decade of the 2000s). Compensatory measures such as a gradual increase in the retirement age and an open labor migration policy, although economically positive, can only partly mitigate the negative effects of a shrinking domestic labor force. In this respect, Russia does not differ from other European countries and some Asian countries. However, demography and shrinking labor supply cannot fully explain low potential growth. Stagnation in total factor productivity is another reason. It results from a poor business and investment climate, difficulty in diversifying away from the dominant role of the hydrocarbon sector, and deteriorating political and economic relations with the US and EU which limit trade, investment and innovation opportunities. To increase its potential growth, Russia needs comprehensive economic and institutional reforms that, in turn, will be conditioned by political reforms and by improved economic and political relationships with the US, the EU and Russia’s neighbors.

The determinants of foreign direct investment in Central Asian region: A case study of Tajikistan, Kazakhstan, Kyrgyzstan, Turkmenistan and Uzbekistan (A quantitative analysis using GMM)

“…This also means if the FDI flow is $1 million, GDP would be increased by $301,058. This result is in line with the findings of previous studies by Dabrowski (2019) and Arazmuradov (2011), that in most cases GDP growth will attract FDI. Hence, all CA countries must stabilize their GDP growth to attract continuous FDI to the region for the betterment of the investment status.…”

Thirty years of economic transition in the former Soviet Union: Macroeconomic dimension

“…The US, EU, and several other countries and international organizations reacted with political and economic sanctions against Russia. In turn, it responded with retaliatory countersanctions against countries that sanctioned Russia (Dabrowski, 2019). Russia also terminated a free trade agreement with Ukraine on January 1, 2016 due to the entry into force of the EU-Ukraine Deep and Comprehensive Free Trade Area.…”

Policy Uncertainty, Oil Price, Stock Market and Precious Metal Markets Volatility Spillovers in the Russian Economy

“…This has squeezed down access to global financial markets, thereby reducing capital inflows. The high dependence of a major oil-importing country like Russia on oil revenue makes it even more vulnerable to the extent that it affects financial market by bringing large changes in cash flows in response to even insignificant changes in oil prices and exchange rates (Dabrowski, 2019;Huang et al, 2017). Economic policy uncertainty arises as the Russian government has lost a significant portion of its revenue due to economic sanctions, therefore unable to provide due financial support to the private sector.…”