FBK’s Economic Club Experts About Investments and Economic Growth

What is happening with investments in equity? Why does the percentage of investments still fail to reach planned 25% of GDP? What distinguishes investments in Russia? Is it possible to become one of the five largest economies in the world if investments will grow as projected? These were some of the questions discussed by top Russian experts at the meeting of FBK’s Economic Club.

Igor Nikolaev opened the discussion by presenting an analytical report titled “Investments as a Source of the Economic Growth” prepared by FBK Strategic Analysis Institute. In particular, it shows how investments in equity have been changing since 1990. Investment amount is now lower than in 1990 by 26%.

Igor Nikolaev said that according to the forecast of the Russian Ministry of Economic Development, the investment growth rate will rise from 3.1% in 2019 to 7.6% in 2020 and remain at 6-7% up to 2024. If it really happens, Russia will solve its main macroeconomic objective of becoming one of the five largest economies in the world by allowing the GDP growth rate above the global rate.

“However, due to the increasing uncertainty of the economic situation, growing tax burden, unpredictability of the economic policy, exchange of sanctions, slowdown of the global economy and other negative impacts, the International Monetary Fund seems more realistic (as compared to the Russian Ministry of Economic Development) as it says that Russia’s GDP will grow at a rate not exceeding 1.8% per annum until 2024. In this situation Russia will not become of the five largest economies in the world. Moreover, it will give its current sixth place in the list to rapidly growing Indonesia and fall to the seventh place,” Igor Nikolaev said.

Sergey Vasiliev, Deputy Chairman of the Management Board of Vnesheconombank, agreed by saying that investments are likely to grow even slower than in the pessimistic scenario. “I, for example, do not see what can contribute to an increase in investments, especially those that can have an impact on GDP. I do not see any motivation for investors. My forecast is that the percentage of investments in GDP will grow at 1%,” he said.

Anton Struchenevsky, a senior economist at Sberbank CIB, said that the economy will grow only if investments in it will turn out to be effective. “It is important to harmonize the interests of private investors and the government. If a road is constructed, somebody should use it,” the expert said.

Andrey Kaukin, Head of the Sectoral Markets and Infrastructure Department of the Gaidar Institute, said that the connection between investments and the economic growth is evident but the question is how one affects the other. “And it is not always evident. Besides equity and labour, GDP depends on total factor productivity; one of its components being human capital has an indirect impact on the economic growth. We will anyway need to train personnel for a new factory, i.e. to invest in human resources.

Oleg Buklemishev, Director of the Economic Policy Research Centre at Moscow State University, compared private investments with a camel that cannot be forced to drink unless it wants to. “And it is also impossible to force individuals to invest unless it is beneficial for them,” the expert said.

FBK’s Economic Club is a unique discussion platform where journalists can meet well-known economists, politicians and public officials in order to discuss a wide variety of economic issues. Analytical reports prepared by FBK are also presented in the Club.