The FBK Economic Club experts on the prospects and forecasts of economic revival

In the course of a regular meeting held as part of the FBK Economic Club session the panelists discussed the nature of the economic recession, its underlying drivers and anticipated time frame required to finally get out of the woods.

Most of the panelists agreed that the current crisis is of a prolonged nature with far-reaching implications on the country’s economy and society. They also shared an opinion that measures the government is supposed to take to overcome the downturn must be timely, adequate and proactive.

Igor Nikolaev, Director of the FBK Institute for Strategic Research, a professor of the National Research University Higher School of Economics opines that the reсession we are living through is a structural one, which is the hardest and the longest type of economic crises and which will last until the structural disproportions which had established by its outburst are removed.

Among major reasons behind the current state of economic affairs are, in the expert’s opinion, the lack of balance between commodities and processing sectors, state and private capitals, problems in social and government controlled areas.

He went on to say, «We believe, the recession is getting prolonged, it will last for no less than four to five years, whereby major risks will hit the country’s economy after 2016. At present there are no visibly positive factors which could have a favourable impact on the state of things, neither in terms of the commodity market prices, nor in the foreign economic affairs».

Yevsei Gurvich, Head of Economic Expert Group drew the panelists’ attention to the fact that the economically adverse impact is mainly driven by the decrease in oil prices which continue to trend consistently downwards. The impact of the foreign economic sanctions imposed on Russia’s economy is much less significant. The pundit added, «The country’s economy must aim to adjust to foreign economic conditions and remove the existing imbalance in budgetary sphere, in manufacturing production area. Unless there are new external shocks, such as decrease in global GDP growth, military conflicts and other similar circumstances, the end of the acute phase of the crisis could be expected as early as this year. Further on two scenarios are possible, a moderate growth scenario or a stagnation scenario, with the likelihood of the second one being higher than that of the first one».

Tatyana Maleva, Director of Institute for Social Research and Forecasting of RANEPA, dwelt on the social aspects of the current recession. She noted that its negative impact is manifested in the increase in latent unemployment, decrease in real income, and, generally, change of economic behaviour. As explained by the expert, one of the key problems is a predominant intent of the Russian people to spend less (reduce spending) rather than to earn more (increase income) in times of crisis, which is characteristic of their current economic behavior. Given that, she sees it undesirable to reduce pensions and social benefits even towards achieving a well-balanced budget.
 
According to Vladimir Nazarov, Director of the Financial Research Institute of the Finance Ministry, negative implications on the Russian economy, internal as well as external, are expected to last in the short-term period, the major of them being decrease in commodity prices, specifically fossil fuels prices, which could last for no less than ten years, which in its turn is driven by the development of shale industry throughout the globe and the growth in liquefied gas production. Among other implications mentioned by the panelist are probable cyclical nature of economic crisis behaviour on a global scale, which will reduce Russia’s growth perspective among other affected countries, and reduction in domestic demand, that of consumers and corporations, which could lead to domestic market decline. The panelist stressed, «to reverse the negative trend, we could take a number of measures, including small- and large-scale privatisation, more flexible employment law, but first and foremost is guaranteed property rights. To achieve that, local government authorities must undergo a reform and be provided with exercisable management powers. Other necessary reforms include judicial reform and law enforcement authorities reform. These measures may take long time but they are critical to get the country out of the crisis. Neither country could ever overcome the crisis without ensuring guaranteed property rights and a well-proportioned budget.»

The FBK Economic Club is a unique discussion forum which facilitates expert insights exchange between mass media and renowned economists, politicians and government officials. The Club’s meetings also feature research findings reports prepared by the FBK company.

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