Translated material
Human factor
The Russian economy will be saved by investors from the West and migrants from the East
The World Bank's annual report on the Russian economy this time was devoted to regional policy. His main conclusions are disappointing - the population is decreasing, and the stratification between rich and poor areas is growing. Although the World Bank experts found something to praise the Russian leadership for.The World Bank highly appreciated the efforts of the Russian government in strengthening macroeconomic stability and improving the investment climate. According to the chief economist of the Russian representative office of the bank, John Litvak, at the end of the year, provided that all positive trends continue, a net inflow of private capital is possible for the first time. And even if, as in all recent years, the outflow continues, its size will be insignificant.
Minister of Economic Development German Gref agreed with this forecast yesterday. He did not rule out that by the end of 2005 a net influx of capital into Russia would be recorded. “Everything will depend on the fourth quarter; the trends in the third quarter are positive,” the minister said. According to the WB itself, for the nine months of 2005, the net outflow of capital from Russia amounted to $2.8 billion, compared to $17.4 billion for the same period in 2004.
Investors, according to the bank's estimates, are ready to actively invest money in the economy. “We saw a similar situation in 2003, before the Yukos affair,” said Mr. Litvak, presenting the World Bank's annual report on the Russian economy. True, despite the “continuation of reasonable macroeconomic policies,” the monetary authorities failed to cope with inflation. According to World Bank estimates, price growth at the end of the year will exceed 12%. That is, World Bank economists give an even more gloomy forecast than such harsh critics of the domestic economic course as presidential adviser Andrei Illarionov.
Now, according to World Bank experts, the Russian authorities should focus on equalizing living standards in different regions. “Now is the right time to develop a strategy for regional policy and regional development,” Mr. Litvak said. The stratification, according to Western experts, will only increase. According to the World Bank, the number of regions experiencing economic decline has already increased significantly. If last year there were only nine such regions in Russia, then in the first half of this year already 33 subjects showed negative industrial growth. Last year, growth of less than 3% was observed in 19 regions, in the first half of this year - already in 37.
According to World Bank experts, Russia should pursue a policy of equalizing the level of regional development and maintaining a minimum standard of living in depressed areas. Minimum, but not higher. “Russia’s legacy from the Soviet Union was an irrational geographic distribution of labor,” noted John Litvak. A World Bank economist proposes to facilitate the movement of people from the northern regions of Russia to regions with a more favorable living environment. To this end, he considers it possible to cancel subsidies to the northern regions so that the population is forced to leave there.
Another problem that needs to be solved, but to which Russia pays very little attention, is demographic. Russia is already showing a population decline of 6%. After 2007, the population in the central regions of the country will decline at an even greater rate, and by 2050 the country's population is expected to decline by 17%. At the same time, the country has a huge migration reserve - “millions of qualified Russian-speaking residents of the former republics of the USSR.” And the extremely low level of social protection allows us to count on the fact that all those who come are looking for work, and are not trying to live on unemployment benefits.
In addition, Mr. Litvak supported the idea of the head of the Federal Service for Financial Markets, Oleg Vyugin, to support the Pension Fund with money from the stabilization fund: “The Pension Fund deficit will only grow. Therefore, you can, for example, spend this money on opening special accounts in foreign banks for those pensioners who, due to their age, do not have time to take advantage of the funded pension system."
But another government initiative (more precisely, the idea of the government apparatus and Prime Minister Mikhail Fradkov), to reduce VAT to 13%, seems controversial to Mr. Litvak. The very intention of the authorities to ease the tax burden is very promising, since it compensates for the strengthening of the ruble and increases the competitiveness of Russian industry, but “this particular initiative is highly controversial, since VAT represents the only major source of revenue for the federal government, which is not very sensitive to fluctuations in oil prices and gas,” the report says.
Although the thesis that “oil prices cannot rise forever” has been uttered at least ten times, the Russian economy is not in danger of serious shocks. A World Bank economist believes it is unlikely that the price of oil could fall below $20 a barrel. “It is most likely that the financial reserve that Russia now has is not temporary, but forever,” said John Litvak.