- Russia must cut deficit to 1% of GDP in 3-4 years, Kudrin says
- GDP growth of 4% in 2018-2019 is possible only with reforms
Russia will face continued stagnation unless the government cuts the budget deficit, reins in inflation and carries out reforms, former Finance Minister Alexei Kudrin said he plans to tell President Vladimir Putin at a meeting this week.
“We have reached the last stand,” Kudrin, now an adviser to the president, said in a phone interview. “My goal is to show that there won’t be economic growth if we don’t reform institutions.”
The only way Russia can hold spending and also narrow the budget gap is to boost economic growth to 4 percent in 2018 and 2019, according to a presentation prepared by the Center for Strategic Research, where Kudrin is chairman, for a meeting Wednesday with Putin’s Economic Council.
Reaching such growth levels in the mid-term is only possible with reforms that include cutting the state’s role in the economy, increasing the pension age and making the judicial and law-enforcement systems more independent, according to Kudrin.
Putin, who ordered the center to prepare a strategy for development after the 2018 presidential elections, faces the longest recession in two decades after oil prices slumped and the U.S. and Europe imposed sanctions over Russia’s support of separatists in Ukraine.
Russia must change the structure of state spending, cut its budget deficit by 2 to 2.5 percentage points within the next three-four years, and bring annual inflation down to 3 percent or 4 percent to spur economic growth, Kudrin said. Narrowing the gap will pose a “serious challenge for tax and fiscal policies,” according to a copy of the presentation.
Controlling spending is important to reining in price growth, and a key factor for long-term development is low and predictable annual inflation of 3 percent to 4 percent, according to Kudrin’s presentation.
At a meeting Monday, a working group of the presidential Economic Council will review Kudrin’s proposals.
The Stolypin Club, a group of economists and entrepreneurs who are also represented on the board of Putin’s council, are planning alternative proposals, pushing for a Russian version of quantitative easing. They want the central bank to offer project financing to commercial lenders and development institutions and provide at least 1.5 trillion rubles ($22.4 billion) annually for five years to fund high-tech projects, according to their presentation.