Russian economy growing but further reforms needed – OECD

The Russian Federation’s economy is growing, but further reforms are needed to bolster future growth, improve the business climate and strengthen innovation, according to the Organisation for Economic Co-operation and Development (OECD).

The OECD Economic Survey of Russia, presented by OECD Secretary-General Angel Gurría to First Deputy Prime Minister Igor Shuvalov during a special panel of the Gaidar Forum in Moscow today, underscores the importance of making the economy less dependent on fluctuations of world market prices for natural resources, increasing productivity, and better matching skills to jobs.

It also calls on the Russian Federation to tackle inter-regional inequality, an area where progress has been slow in the last decade.
“The Russian economy is at a crossroads,” said OECD Secretary-General Angel Gurría. “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.”

The Survey indicates that the Russian Federation is doing well on a number of fronts but that future growth is being held back by poor governance and rule of law issues. Productivity and living standards are also still well below those of the most advanced market oriented countries, and the speed of convergence since the crisis has stalled.

Establishing a transparent, coherent and predictable business climate would help chart a path for stronger growth. The Survey urges sustained and effective anti-corruption measures, greater judicial independence, and a reduction in barriers to market entry and competition. Accelerating privatisation that is well-managed should go hand in hand with fostering a level playing field between public and private companies.

The OECD encourages tackling transport bottlenecks by improving the efficiency of infrastructure spending, promoting competition in the transport sector and ensuring better policy coordination to address urban transport challenges.

When it comes to innovation and integrating Russia into global value chains, the Survey recommends broad based support for 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 Federation has one of the highest shares of tertiary educated population in the world, but the education system has had difficulties supplying the right mix of skills for employers. Increased educational spending should be a priority, in particular in poorer regions, and restructuring of vocational and higher education institutions should continue, improving curricula and links with business.

The Russian labour market is very flexible. This helps to achieve low unemployment, but excessive labour turnover limits incentives to invest in human capital, which thwarts economic growth and can lead to higher inequalities. The Survey encourages more balanced dialogue between employers and labour, as well as strengthening lifelong learning, activation programmes and temporary income support.

The OECD recommends limiting ageing related spending increases. It suggests raising women’s retirement age to the same as men’s and increasing both in line with rising life expectancy while implementing other measures to increase the effective retirement age. 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.

The Survey was drawn up and published in the context of ongoing discussions on the Russian Federation’s potential accession to the OECD. The OECD accession process covers diverse policy areas including investment, environment, anti-corruption, corporate governance, scientific and technological policy and public governance.

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