BOFIT Weekly Review 2016/25
Russia debates course of economic policy
The economic council led by the president is set to prepare over the next year a new economic policy programme for Russia that will extend through 2025. The work began at the end of May when two main expert-drafted proposals on restarting economic growth were presented to the president at the council meeting. While both programmes seek to increase the investment rate, their views on the roles of monetary and fiscal policy in supporting change are diametrically different.
The programme espoused by Alexei Kudrin, former finance minister and current deputy chairman of the economic council, calls for moderate monetary and fiscal policies. Kudrin said that Russia needs a stable macroeconomic environment to attract investment, which would be best achieved by balancing government finances and keeping inflation relatively low and stable. In the current policy framework, the central bank and the finance ministry are closest to this view.
The Stolypin club offered a completely different approach, which has been prepared under the lead of the club’s chairman, business ombudsman Boris Titov. In addition, the part concerning monetary policy seems to reflect largely the views of president’s advisor Sergei Glazyev. Under the proposal, investment would be supported through increased government spending and pumping central bank money into the economy. The goal of exchange rate policy would be to target a steadily depreciating ruble exchange rate, with limits, if needed, on currency exchange to prevent excessive depreciation. In the current administration, the economy ministry supports looser monetary and fiscal policy, but its views are much more moderate than those of the Stolypin club.
Both programmes are quite unanimous on the needed major structural reforms, despite some differences in emphasis. Both programmes call for improving the business environment, reducing the government’s role in the economy, diversifying the production structure and increasing international openness. The import substitution policy currently popular with the leadership receives no support under either proposal.
The president has yet to take an official stance on the proposals and the discussion of the economic policy framework will continue at future council meetings. It has yet to be seen how much of an effect the programmes will have on actual economic policy. Recently, at least, economic policy has been overshadowed by domestic and foreign policy issues, as well as aspirations of economic independence. Policy choices important for re-establishing economic growth have taken a back seat.