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Whither the Russian economy?
Dr. Sergei Guriev
By kind invitation of Chris Bryant MP and The All-Party Parliamentary Group on Russia, the Henry Jackson Society was delighted to welcome Dr. Sergei Guriev to present his thoughts on Russia’s economy and the impact of Western sanctions on it. Dr. Guriev joined the European Bank for Reconstruction and Development in 2016 after running the New Economic School in Moscow in 2004-2013 and serving as a tenured professor of economics at Sciences Po, Paris in 2013-2016. In 2009-2011 he was included in the top 100 of the President of Russia’s Cadre Reserve. In 2016-2017, Dr. Guriev has served as the President of the Society for Institutional and Organizational Economics. He is also a member of the Executive Committee of the International Economic Association and a Research Fellow at the Centre for Economic Policy Research, London.
The event started with Chris Bryant’s opening remarks. Dr. Guriev was then given the floor where he introduced himself as an economist in the organization where both the UK and Russia were shareholders. As a representative of the EBRD, he focused on the recent past of the Russian economy, as well as on its future perspectives. Dr. Guriev stressed that the lack of structural reforms accompanied by decline in the oil price in 2013 resulted in Russia’s economy having been decreased by 3%. The second half of 2017 was still difficult for Russian economy which showed 1.7% growth. Dr. Guriev emphasized that stimulating Russia’s economy without reforming it, given its current condition, would be unfeasible and reminded that the investment remained at a low level. Although Russia’s growth rate would remain low regardless of the oil price, many things would have been possible if Russia implemented those reforms and opened up its economy.
On the other hand, the state budget suffers because of the situation on the global energy market. Unlike 2008-2009 recession, which was covered by the stabilization fund, the current economic crisis is being paid for by Russian households. That said, Dr. Guriev thought it was unlikely that Russia was going to experience a macroeconomic disaster in the next two to three years. Russia’s Central Bank acknowledged the economy’s dependency on oil prices, so they allowed the national currency to fluctuate. The banking system, however, was not doing well – only one out of ten acting banks in the country remained private. According to Dr. Guriev, the future of the Russian economy would depend on whether the government will be ready to implement the reforms. As a country that has a big advantage in terms of human capital, Russia needs to tackle low income levels and wealth inequality.
In the end of his lecture, Dr. Guriev answered questions from the audience. The majority of those were about Russia’s defence spending and how she manages to maintain it despite the current economic situation inside the country. According to Dr. Guriev, starting from 2015 Russia was spending less on defence. At the same time, major cuts were introduced in pensions and salaries, as well as in education sectors. He also said that the Russian economy will only benefit if the sanctions were removed. At the moment, Russian investors are taking money out of Russia which only adds to the unfavourable economic climate in the country. Guriev reminded that Russia’s offshore wealth was concentrated in the hands of 1% of total Russian population.