Russia Economics - What Can Drive Russian Growth Above 2% Over the Next Decade

Russia's economy grew 2.2% over 2017-19. This came at a time when inflation was running below the official 4% target and the economy's growth potential was higher. However, we think that after the rebound this year following the Covid crisis that Russia's economy may be able to sustain growth levels above 2% over the next decade. > Pension reform will have the effect of increasing the labor market. By 2036, the number of people of working age will climb by 5.5 mln (a 6.6% increase). On our estimates, over 2021-30 the average annual growth in the workforce will total 0.4-0.7%. > Higher investment will accelerate accumulation of fixed capital. By 2030, the government plans to increase investment by 70% versus the 2020 level, which would mean investment growing at a 5.4% clip per year. The higher investment will mean an increase in output potential in the medium term. > Stricter environmental requirements are both a challenge and a new catalyst for economic growth. On the one hand, this will force companies to invest in new technologies that will facilitate the modernization of production. On the other hand, there is a threat to growth rates if demand for oil, gas and coal drops quickly.