World Economy

Russia Economy Cannot Grow Without Structural Reforms

Russia Economy Cannot Grow Without Structural Reforms
Russia Economy Cannot Grow Without Structural Reforms

Russia’s economy won’t return to steady economic growth in the near term even if oil prices recover as the country needs structural reforms, the central bank’s governor said Tuesday.

Speaking at a Moscow Exchange forum, Elvira Nabiullina said that the economy may return to growth in upcoming quarters but its expansion won’t exceed 2% even if oil prices return to $100 a barrel, Reuters reported.

Nabiullina painted a more cautious picture, but agreed that internal policies were more important than oil prices.

“We see a high probability that the economic growth rate in quarterly terms may turn positive this year, although for the year as a whole the rate may be negative,” she said.

Last week she said the economy may contract this year by less than 1.3-1.5%, the central bank’s official forecast, if oil prices remained at present levels.

She said on Tuesday that, even if oil prices rose significantly, Russia’s growth rate would be limited without internal economic reforms.

“If we are talking about stable development of the country in the medium term this is an entirely internal problem,” she said.

“Whatever the oil price is, even $100 (per barrel) again, we won’t be able to grow by more than 1.5-2% if we don’t carry out structural reforms and improve the investment climate.”

Meanwhile, Russian Deputy Prime Minister Arkady Dvorkovich said at the same forum that the country’s economy is able to grow at oil prices as modest as $30 or $40 or $50 per barrel.

He said that whether growth could be achieved “depends almost entirely on ourselves, on our own efforts”.

Global oil benchmark Brent hit a 2016 high above $43 per barrel on Tuesday, ahead of a meeting of major producers to discuss freezing output levels to rein in oversupply.


Russia’s economy has managed to adapt to the difficult macroeconomic conditions, already showing the first signs of stabilization, Alexis Rodzianko, President and CEO of the American Chamber of Commerce in Russia, said.

“I think that stabilization has already begun to take shape. The ruble has been at a standstill for some time, or even strengthening. People are getting used to what is now called a ‘new normality’, to the fact that now, in the new circumstances, it is necessary to readjust and move on,” Rodzianko told RIA Novosti ahead of the InvestRos International Conference on Ensuring Growth in Investment in Russia.

In February, Russian Economic Development Minister Alexei Ulyukayev said the country’s economy might see renewed growth in 2016.

  Sanctions Standstill

“I wouldn’t say that the situation got worse, but it is a fact that it came to a standstill. It will be very important to follow the European conversation on the issue because the Europeans in June are reviewing the extension of the most important sanctions, the sanctions that affect the banking system and the sanctions that affect energy companies,” Rodzianko said.

In 2014, the European Union and the United States sanctioned Russia’s key defense, energy and banking sectors following Crimea’s reunification with Russia and accused Moscow of fueling the armed conflict in eastern Ukraine. The Russian economy suffered a setback as the ruble lost about half of its value against the dollar amid low global oil prices and the sanctions.

Russia has repeatedly refuted all allegations, warning that the western sanctions are counterproductive.

  Clear-Cut Lease Rules

Commenting on lease disputes, he said, Russia needs better defined laws on the lease to turn this industry into a viable source of finance for small enterprises.

Russian courts sometimes make controversial decisions in lease disputes, ruling in favor of third parties that bought claim rights and subsequently demanded large sums of money through the court, Rodzianko said. This has already prompted some leasing companies to leave the Russian market.

“In any case, such practice increases risks and leads to price hikes that hurt small business, among others. That is why we are asking for clearer [lease] rules to avoid practices that incur higher risks,” he said.