Restoring Russia’s resource-dependent economy: From the Dutch Disease towards economic growth

Abstract

The sharp decline in world oil prices in March 2020 due to difficulties in OPEC+ nego tiations and a drastic reduction in demand from the real sector caused by the Covid-19 pandem ic has seriously aggravated the problem of economic growth for resource-dependent economies. The paper aims to search for the trajectory for the resource-dependent countries to revamp their economies to return to sustainable growth. The research methodology includes fundamental theories of economic growth and theoretical propositions describing the behaviour of resourcedependent economies. Using the methods of correlation, graphical and comparative analysis to study short time series, the authors show that despite the severe short-term consequences, a steady decline in resource export revenues can trigger the process reverse to the Dutch dis ease. Its launch mechanism is going to be soaring prices of imported goods in the domestic market that will lead to a switch in demand for domestic substitutes under falling incomes. A similar process took place in Russia in 1998–1999, when a deep devaluation of the ruble led to the economic growth based on import substitution. Combining the experience of the Russian economy with the identified current peculiarities, the authors demonstrate that the growth can be restored given the country develops an updated strategy for structural development. Com paring the results obtained, the authors reach the conclusion that Russia is among the states that are able to successfully implement the possibility of structural economic transformation.