Calling for reforms: the post-crisis development in Russia

In Challenges of Post-Crisis Economic Policy in Russia (CASE Network E-brief 04/2010) CASE expert Sergey Drobyshevsky discusses the current policy challenges and constrains of post-crisis development in Russia. Economic stabilization in Russia, one of Emerging Countries hardest-hit by the recent economic crisis, was achieved in the first half of 2009 due to the increase in oil prices, and no evident economic policy missteps on the part of the government or monetary authorities. However, this self-supporting economic stabilization without specified strategy or task-oriented exit policy leaves fundamental problems of the Russian economy unresolved. The most calling problems stressed by Drobyshevsky are the lack of labor market adjustment mechanism, the problem of mono-cities, the standstill experienced in institutional reform, the lack of progress in the banking and financial system reforms, the inefficient pension system, and finally, imbalances in the real estate market.

Drobyshevsky warns that post-crisis Russia faces the risk of losing previous gains brought on by the period of rapid economic growth. By avoiding the implementation of solutions to its most critical problems and postponing badly needed reforms the Russian government continues to preserve the dominant role of its raw materials sector, despite its slogans about the need for modernization, economic diversification and shift towards a more innovative development path.