Russian economy growing but still needs further reforms, OECD says
The Russian economy is growing, says the OECD, but it needs further reforms in order to encourage future growth, stimulate innovation and improve the business climate.
Angel Gurría, Secretary General of the OECD (Organization for Economic Co-operation and Development), presented the OECD Economic Survey of Russia to Igor Shuvalov, Russia’s Deputy Prime Minister, during a special panel of the Gaidar Forum in Moscow.
The report emphasizes the importance of making the Russian economy less dependent on the changing world market prices for natural resources, raising productivity, and matching skills to jobs.
The authors also urge the Russian Federation to address inter-regional inequality, an area where progress over the last ten years has been slow.
“The Russian economy is at a crossroads. It has tremendous potential but is still heavily reliant on volatile revenues from natural resources. It would do well to invest more in infrastructure, human capital and innovation, so that larger segments of society can partake in Russia’s transformation.”
Reforms would boost the Russian economy.
Russia doing well on several fronts, but…
According to the Survey, Russia is doing well on several fronts, but poor governance and rule of law issues are undermining future growth. There is still a wide gap regarding living standards and productivity compared to the most advanced market-oriented nations. The authors point out that since the crisis the speed of convergence has stalled.
The OECD believes that “Establishing a transparent, coherent and predictable business climate would help chart a path for stronger growth.”
The report says Russia needs:
- Sustained and effective anti-corruption measures.
- Greater judicial independence.
- To bring down the barriers to market entry and competition.
“Accelerating privatization that is well-managed should go hand in hand with fostering a level playing field between public and private companies,” the authors added.
The efficiency of infrastructure spending needs to be improved in order to tackle transport bottlenecks. Urban transport problems could be improved by promoting competition in the transport sector.
To promote innovation Russia needs to help and encourage the adoption of new technologies, “including those beyond the high-tech sector, particularly to improve energy efficiency. It also urges finalizing public R&D sector reform.”
The Russian economy is too dependent on natural resources.
Russia has good education but poor matching of skills to jobs
While the percentage of Russian adults with college degrees is among the highest in the world, the country still struggles to supply the right mix of skills for employers. Spending more on education should be a top priority, especially in poorer areas, and “restructuring of vocational and higher education institutions should continue, improving curricula and links with business.”
While the Russian labor market is extremely flexible, which helps keep unemployment levels low, excessive labor turnover reduces the incentives to invest in human capital, which in turn limits economic growth and can lead to greater inequalities.
The OECD says there should be more balanced dialogue between employers and workers, lifelong learning should be strengthened, as should activation programs and temporary income support.
Aging-related spending increases should be limited. The authors suggest that women’s retirement age should be raised to the same as men’s, and then further increased to take into account longer lifespans.
The OECD added “Simultaneously improving the balance between work and family commitments and creating more career opportunities in the workplace could contribute to a reduction of the gender pay gap and could help normalize demographic developments.”