Russia » Economics

Economic crisis slowed down Russia’s development by 30 years

Even in best case scenario, Russia will have reached the economic showing it had in the 1980s only by 2012.
Russia will be able to implement the President’s idea to double the country’s GDP by 2012 only if the ratio of public expenditures to GDP will be decreased, the state budget stabilization fund will be preserved, the growth of natural monopolies tariffs slows down, and the rate of exchange of Russian rouble to the US dollar decreases dramatically.

This is the opinion of Russian President Aide on Economics Andrei Illarionov who gave the press-conference to interpret the economic aspects of the recent address of Russian President to the Parliament.

To implement the second important task – reducing the number of the poor, structural reforms of the social sector should be continued to move the “spheres where the state dominates” to the “market principles” loved by the reformers.

This means reducing the percentage of public expenditures, salaries and social allowances in particular, and this is supposed to result in releasing economic resources for the private sector, increasing employment and economic activity of people.

However, even the most optimistic prognosis of Russian officials come true, the biggest achievement for Russia in 10 years will be its return to the same ratio of GDP per capita to the average GDP in the world, Russia had in the beginning of the 1980s.

President’s Aide said that Vladimir Putin assigned the country greater task than just doubling GDP or reducing the number of the poor. “The main purpose is creating free community of free people in the country”, Mr. Illarionov quoted the President.

Andrey Illarionov said that the President did not really name 2010 as the deadline when Russia’s GDP should be increased twofold, the President meant that this is possible to do by 2010, but the real deadline is 2012. To double GDP by 2012, it should grow by 7.2 percent every year, to double it by 2010, GDP should have annual growth by 9.3 percent.

Mr. Illarionov said that 70 countries were able to increase their GDP twofold for 10 years, in the last 50 years. If Russia succeeds as these countries did, its GDP per capita will surpass this of the USSR in 1989 by 1.5 times. In addition, Russia will have a small chance to fit in the domain of the “second echelon” of the developed Western countries.

Currently Russian GDP in terms of purchasing capacity is $8,000 per capita, if it becomes $16,000, Russia will achieve the current level of Portugal, Greece, Malta, Czech republic, South Korea and some other countries. The problem is, these countries are unlikely to wait until Russia surpasses them. By the time Russia doubles its GDP, the developed countries will advance, and Russia still will be unable to keep up with them.

According to Mr. Illarionov, Russian economy should grow faster than the other countries’ and the global economy, this is the only way for the country to succeed. In the last 10 years GDP in Russia fell below the average world figures of GDP, Russia encountered such recession only after World War I and World War II.

Absolute figures of Russian economy are still by 22 percent less than those of Russian economy in 1989 (the most successful year for the economy of the Soviet Union).

The President’ address had no data on reducing poverty, but Andrey Illarionov said that it would be good to reduce the number of the poor twofold in the several years to come. In 1992, 50 million of Russians lived below the living wage, in 2003 (when the living wage was about $70 per month) 30 million people survived on smaller sum of money.

Mr. Illarionov named China as the best example of eradicating poverty. In the last 20 years the number of the poor in China was reduced by 420 million. 

Mr. Illarionov came to the sad conclusion that even Russia implements its plans, it will totally have 30 years of stagnation: 15-16 of economic crisis and 14 years for getting out of the crisis state to come back where Russia was in the beginning of the 1980s (in 1983 Russia’s GDP per capita surpassed the average GDP in the world by 65 percent). This is the price we are paying for the mistakes made both in the Soviet epoch and in the 1990s, for the policy resulted in the severe economic crisis”.