In Russia, fight with the “Dutch disease ” began

The authorities began to discuss recipes for the fight against the “Dutch disease.” They concern options for restricting raw materials exports for prevention of this risk in the future.

A “Dutch disease” (or Groningen effect) is a skew that arises in the country’s economy when the mining sector develops to the detriment of the rest, a private investor, founder of the School of Practical Investment Fedor Sidorov explained to Invest-Foresight.

This is very relevant for Russia, which for decades has been and remains a raw material exporter, while producing high-end products is simply not profitable for us (due to high costs, domestic goods are more expensive than imports). Ultimately, sales abroad of raw materials lead to strengthening of national currency, and this affects negatively other industries – products are also becoming more expensive in foreign markets compared to competitors.

And these problems escalated in 2022, when at the same time sanctions are active (leading to restrictions on exports and imports), but also we face high prices for raw materials and the ruble has strengthened excessively. Exports for individual items sank more than by 50% (for example, for gas), and imports also decreased, the expert emphasizes.

Unbalance of exports-imports, strengthening of the ruble require quick solutions from a state that already has a budget suffering from an income deficit.

“That is, if quite simply, in monetary terms, the volume of exports (due to reorienting supply flows to Asia) and import volumes (due to the parallel import program) must be equal, – Fedor Sidorov explains. – This is a macroeconomic task, a difficult one in the situation of sanctions, geopolitical confrontation, internal difficulties, etc. How it will be possible to cope with it, time and dynamics of economic indicators of the country will show.”

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