Nikita Maslennikov: We cannot do without stimulating investment activity

Invest-Foresight continues a series of interviews with leading Russian economists on the results of the year. Nikita Maslennikov, head of Finance and Economics at the Institute for Modern Development, shared his opinion on what the economic results of 2023 were and what, in terms of the impact of the economy on reality, we expect from 2024.

Nikita Maslennikov, Director of Economics and Finance at the Institute of Modern Development

– The main result of 2023 is quite bilateral. On the one hand, we still ensured macroeconomic, financial stability, despite the increasing sanctions pressure. And, in fact, they began to move along the main route of gaining sovereignty: the formation of a new economic structure in the Russian Federation, we began to advance significantly along the path of structural transformation of the economy.

This is the main result, and it is certainly positive. Because the trajectory of future development has clearly been determined. But, naturally, there are also accompanying points that are associated with certain risks. One of them is, of course, the overheating of the economy, which we received at the expense of the acceleration of consumer demand due to the not yet shrinking imbalance between demand and supply. And this gives us a fairly strong inflationary impulse, which we received in full in 2023.

Plus, in 2023 there were rather difficult situations related to the dynamics of foreign trade settlements, the dynamics of the ruble exchange rate against the dollar and the euro. All these are the accompanying circumstances of those very positive shifts. And, in fact, all these risks, both inflationary pressure and the uncertainty of the dynamics of the global economy, and therefore, external demand for Russian export goods – all this is transferred to 2024. Which, in turn, in the future creates a risk zone for increased exchange rate volatility.

2024, in my opinion, will be quite problematic. First, we are emerging from overheating to dynamics adequate to potential growth with current structural constraints. And therefore, of course, our economic growth rate will be about half as low as in 2023. This applies not only to GDP, it concerns investments, real incomes of the population, wage dynamics, dynamics of consumer demand. The pace will be slower. And this is still a serious risk, the continuation of the slowdown in the global world economy – all the current forecasts that we see today indicate that global growth in 2024 will be lower than in 2023 by about 0.2-0.3%. As a matter of fact, the world economy retains quite serious risks of fragmentation, recession, which can happen, already in the global version, in 2025.

In general, there are a lot of uncertain factors that will affect the Russian economy. Moreover, despite all the sanctions, we continue to be quite strongly integrated into the global economy. If, for example, China begins to slow down sharply, this will result in India slowing down, then it will definitely affect us.

A decline in economic growth is already an obvious prospect, so there are tasks for regulators. Of course, the balance of all types and directions of economic policy is very important. First of all, we understand that monetary rigidity will remain at the current level at least in the first half of 2024. And this will require not to stimulate additional inflationary pressure, a reduction in fiscal momentum – budget incentives in 2024 will be less than in 2023. In 2023, I remind you, 2.1% of GDP was at the expense of the budget, in 2024 it will be at the level of 1.4-1.5%.

Such a balancing of fiscal and monetary policy should give a certain general background for financial and economic stability, which is very important for 2024. Because thanks to this background, it is possible to embroider bottlenecks of economic growth. That is, to consistently remove structural restrictions.

For me, 2024 will be justified and successful if it is in line with the structural agenda. That is, technological projects, technological sovereignty, all-round stimulation of investment activity, domestic one, of course, export diversification, taking into account the fact that we need to promote not only energy and raw materials, but also other exports. Naturally, support for small and medium-sized businesses is needed and very important, because this is the area where competition is present and the search for new solutions begins both in the field of the product market and in the field of innovation.

And of course, this is a mitigation of the labor deficit, which is serious and for a long time. Towards the end of the decade, this deficit will only grow in our country, according to various estimates, it can be from 2 to 4 million people. There are several ways: stimulating increased labor productivity and labor-saving technologies. And this means investment, investment activity, without its stimulation, including through taxes, we cannot do. The same duties that are tied to the ruble exchange rate, unfortunately, for many large companies, for example, turned out to be anti-stimulative.

This is one of the most important areas. Second, you need to create a system of permanent professional education for adults. This is re-qualification, the creation and acquisition of new competencies, the transition to other areas of labor activity. We are getting older and we are getting smaller. This challenge for the next 10-15 years is quite obvious, so next year you need to start seriously answering it.

If we move forward in the development of the educational system, then this will be a serious enough bid to defeat the problem.

One of the tasks of next year, which, of course, will depend on the progress of geopolitical affairs, is that in 2024 it is necessary to think about the conversion of defense production. This is also a very serious matter, since they will still have to be switched to civilian products in the middle of this decade.

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