Page 3 - Russia OUTLOOK 2022

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1.0 Executive summary
Political outlook
A host of factors including the adverse economic effects of the coronavirus pandemic, an ageing population and capital flight have converged to create a nightmare scenario for Russian economic policymakers. While the economy bounced back in 2021, all the challenges that Russia has been facing over the last decade remain in place for 2022.
The rapid economic growth which Russia enjoyed in the 2000s following the transition to a market economy has slowed considerably over the past decade. 2021 has been no exception, with lockdowns and other restrictions related to the coronavirus (COVID-19) pandemic further hindering any prospects of Russia’s economy finding its feet. Policymakers have been left in an unenviable position, attending to competing demands in an economy beset by challenges.
Russia’s petro-dollar economic growth model was exhausted in 2013 when growth fell to zero despite oil prices still over $100 at the time. The Kremlin has failed to grasp the nettle and make the deep structural reforms needed to invigorate its economy and has in the meantime fallen into the middle income trap.
The Kremlin is not blind to the problem and in 2018 launched the 12 national projects that are supposed to “transform” the economy, but a series of external shocks in the form of the collapse of the oil prices in 2020 and the pandemic have conspired to delay work and investment.
Consensus among economists suggests that investment in innovation and infrastructure in high-productivity sectors will be an essential component of successful economic policy in Russia. Existing development plans like the National Priority Projects (first announced in 2005) and the Unified Development Plan to 2030 (recently approved, but yet to be published) were designed with this aim in mind, hoping to nurture the sectors which have the greatest growth potential and the most overspill into other areas of the economy.
With the economy bouncing back following the coronacrisis Russia is in its best position in years to make progress on the reform front in 2022, but it remains to be seen if the political will is there. While the necessary reforms are
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