Page 8 - RusRPTDec19
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Turkish Stream is slated for launch in January, while Nord Stream 2 is expected to come on stream later in 2020.
Nord Stream 2 fell behind schedule because of Denmark’s delay in issuing a construction permit, which was finally granted in October.
2.2 Russia fall short of the 2020 economic goals
Russia’s current long-term economic planning document, the concept of socio-economic development until 2020, will expire at the end of this year.
A look at the document’s strategic aims developed in 2008 reveals that not only were many macroeconomic targets unrealized, but in some areas, the Russian economy regressed.
6.5% annual GDP growth
Through state investment in human capital, the business climate, and high-tech industries, real GDP would grow 64-66% from 2012-20, the concept envisioned. In reality, current forecasts for 2019 project that GDP will grow just 5.8% in this time period.
70% real disposable income growth
The concept projected 64-72% growth in the population’s real disposable incomes from 2012-20. While incomes grew from 2007-13 (by 22%), they have declined since 2014. From 2012 to the third quarter of 2019, real disposable incomes have decreased by about 5% in total.
6-7% poverty rate
The 2020 strategy aimed to halve the poverty rate from 13.4% in 2007 to 6-7% in 2020. Poverty levels decreased from 2008-12 (to 10.7%), but have risen since—up to 12.7% in 2Q19. The government has retained its goal of halving the poverty level to 6.6%, but it has extended the deadline to 2024 per Putin’s 2018 May decrees.
11% GDP spent on human capital
The concept envisioned reallocating budget expenses to boost spending on human development from 8.6% GDP in 2007 to 11-11.7% GDP in 2020. In particular, it aimed for 5-5.5% GDP spending on healthcare and 5-6% GDP spending on education. Per the 2020-22 budget, over the next three years the government will spend on average 2.9% GDP on healthcare and 3.7% GDP on education, or just 6.6% GDP total on human development.
Why is this assessment so bleak? Well for starters, the document was developed in 2008, before the global financial crisis slammed the Russian economy. As Natalia Orlova explains, Russia’s GDP growth averaged 7% from 2000-08, and policymakers assumed it would return to high growth following the crisis.
Perhaps the larger problem, however, lies in general Russian economic planning. These goals were based on expectations and wishes, not sober macroeconomic assessments. And as economic conditions fundamentally changed, thanks to the 2014-15 oil price shock and international sanctions, the strategy failed to evolve. Now many of these goals are simply being projected forward to 2024, to be fulfilled by the national projects. The takeaway? Don’t necessarily believe the promises of the government’s long-term economic vision, no matter how much money it says it will throw at today’s problems.
8 RUSSIA Country Report December 2019 www.intellinews.com
