Productivity and long term growth

Going for Growth 2018 - Russia note

 

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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

The convergence process toward the most advanced OECD countries is slowing down, due both to a decline in potential growth and cyclical factors. The still large gap remains mainly driven by productivity, as the employment rate remains above the OECD average. Income inequality is higher than in most OECD member countries, and has increased further in the recent years.
Improving the mix of public expenditure and tax revenues is important for inclusive growth. More spending on education and infrastructure could lift productivity and help reduce the sharp income inequality. Shifting the tax burden from businesses to immovable property, making personal income taxes progressive and improving tax collection would also underpin inclusiveness. Strengthening intergovernmental frameworks and fiscal autonomy of sub-national governments could make public spending more effective. Innovation policies are critical to ensure a transition towards domestically-driven and resource-independent growth. Strengthening the links between the many research institutes at both federal and regional level and the corporate sector could spur innovation. In particular, improving the framework for SMEs would boost entrepreneurship and productivity.

Going for Growth 2017 recommendations include:

  • Reduce state control over economic activity and other barriers to competition by continuing to reduce administrative barriers and widening federal initiatives to regional and local levels. Accelerate privatisation of state-owned banks and enterprises (SOEs). Further improve governance of SOEs and foster a level playing-field between public and private companies, including in the area of taxation. Extend regulatory impact assessments to legislative draft considered by the Duma. 
  • Lower barriers to foreign direct investment by removing administrative entry barriers and refraining from introducing new ones. Shorten the list of strategic sectors with prior approval required for foreign investment and streamline the approval process. 
  • Raise the effectiveness of innovation policy by continuing broad-based support for innovation and the adoption of new technologies. Shift more research from the RAS to universities, increasing the share of competitive grant funding and streamlining state-owned branch research institutes. Strengthen the links between universities and the private sector, especially SMEs, and foster an environment that is conducive for start-ups. Support private-sector innovation activities through universally applied tax credits. 
  • Raise the quality of public administration by continuing the anti-corruption campaign with stronger focus on transparency and accountability of the public sector. Reduce potential for corruption by minimising the need and the scope for subjective decision-making by officials. Improve legal protection of whistle blowers and do not restrict the scope for media and NGOs to publicise violation of the law. Strengthen judicial independence through greater transparency in appointment and promotion processes, better pay and rotation of judges. 
  • Improve the quality of the public finances by increasing the share of spending on education and infrastructure and reduce that on defence. Shift the tax burden from business to immovable property and consider making income taxation more progressive. Improve tax collection. Strengthen intergovernmental frameworks and fiscal autonomy of sub-national governments. Scale up spending on ALMPs, in particular on training and job search support.

Recent policy actions in these areas include:

  • The quality of trade-supporting infrastructure has been improved with the extension of the Saint-Petersburg harbour.

Russia: Latest Economic Forecast

Russia: Latest Economic Survey

 

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