2020 saw significant economic hardships and changes in many sectors. HSE University researchers have explored the impact of economic recovery on Russia's economy and how it will recover from the crisis. Voprosy ekonomiki published their study.The coronavirus pandemic caused a global economic crisis last year. Global output fell by 3.5% in comparison to 2019. The decline in Russia from coronavirus measures was less than in other developed countries. In 2020, industrial production fell by 3.1% and was much more severe than previous crises (7.8% and 5.3% respectively in 2009 and 1998). The recovery from these crises was not the same. In the early 2000s, Russia's economy experienced high growth rates while 2008-2009 saw stagnation. Experts now attempt to predict the future and forecast how sustainable the recovery will look.The paper's authors analysed the factors that contributed to Russia's economic growth from 1995 to 2016. They compared the contributions of different production factors to economic development in Russia between 1995 and 2016. The authors also attempted to differentiate between intensive growth due to lower capital and specific labour costs and extensive growth due to increased use of new resources.Economists use the term Total Factor Productivity (TFP) to describe the efficiency of production and the use of resources. It also determines the growth that is generated by lower factor inputs per unit output. TFP increased at a rate of 5.5 percent per year between 2002 and 2007. This is how almost all productivity growth occurred from 2002 to 2007. Out of the 6 percent, productivity grew by almost all means (through capital inputs), but TFP fell in 2011-2016. This indicates that there has been less sustained economic growth since the 2008-2009 financial crisis.This approach is more common in Russia than it is for individual industries. This means that differences in productivity between industries and labour reallocations between industries are not considered. This can impact conclusions about the intensity and sustainability growth. Researchers have developed the KLEMS indicator system to avoid this problem. This allows for individual industries to be compared and assessed in terms of their contribution to economic growth. It also measures productivity growth and resource efficiency.Two sources of productivity growth exist: intra-industry (technology developments, improvements in labour quality and capital inflows), and structural shifts (reallocations of workers between different sectors). Between 1995 and 2016, the total labour productivity growth was 2.9%. Three-quarters of that came from intra-industry sources. The largest contributors to TFP growth between 2002 and 2007 were trade and telecommunications (EMC) and finance. Only finance and agriculture were positive in 2011-2016. However, the EMC experienced the largest drop which had a significant impact on overall economic growth.The reallocation of labor accounts for a quarter of the productivity growth. The main direction is from goods and services, from agriculture and manufacturing to trade, finance, telecommunications, and finance. Despite this, the average economic productivity is increasing as a result of reallocating workers.The researchers assumed that the main pre-COVID proximate growth sources would remain the same when forecasting. The calculations indicate that capital formation to EMC is expected to make the greatest contribution to economic growth. The most promising area for growth stimulating policies is the improvement of EMC efficiency. These conditions will allow for additional growth through measures to increase production efficiency and exports natural resources. However, these measures must be based on further analysis regarding the causes of EMC efficiency declines that began well before the pandemic. These causes may be objective (e.g. worsening production conditions) or subjective (e.g. imperfect transportation tariffs of petroleum products). To reduce Russia's dependency on the EMC, economic diversification is required as well as a reduction in the EMC's share. Although the necessity to reduce the EMC's share has been debated for decades, the EMC's value added share has remained constant at 20-25% since 1995."For the moment, I believe the situation will be the same as the early 2010s. This was a boom time in China, an increase in commodity exports to resource-exporting nations, and increased investment in the Russian mine complex and related infrastructure. We will therefore see tangible growth in capital intensity in natural resources extraction and export activities. This should be evident in the dynamics of investments in oil and gas extraction and infrastructure mining and processing metal ores and their corresponding export positions," said Ilya Voskoboynikov https:////www. hse. hse. "Another area will show signs of recovery. This could indicate the emergence of new sources of growth."###
