From Stagflation to Sustainable Economic Growth: Imperatives of Russian Macroeconomic Policy

Abstract

This article touches upon the main reasons for the decline of long-term growth of the Russian economy, stagflation, and recession and attempts to justify priority measures of the economic policy in current conditions. Basing on statistical and macroeconomic analysis, the author concludes that the slowdown of economic growth since 2012 has a structural nature. It is also noted that in late 2014–2015, negative effects caused by transition to a new general equilibrium (trend), which is characterized by a lower longterm economic growth rate, were aggravated by a conjuncture cycle associated with the emergence of the balance of payment crisis, which consequences are largely overcome today. A rapid correction of the current account and real wages was made thanks to the policy of free floating exchange rate, and this allowed the economy to move to a recovery growth on a quarterly basis in the second half of 2016. However, it is too early to speak about full adaptation to the changing conditions of the glo al economy (at least, before the stabilization of the public finances) and elimination of structural imbalances in the economy that are negatively affecting the GDP growth rate. In this article, the author lays down key challenges in the field of structural policy and institutional environment improvements, as well as provides conservative macroeconomic policy guidelines aimed at decreasing inflation and improving long-term fiscal sustainability. It is emphasized that implementation of these measures will create necessary conditions for transition to the investment model of economic growth in Russia