Novak sees change in structure of budget spending, tight monetary policy, labor shortage as main risks to Russia's economic growth
ST. PETERSBURG. June 5 (Interfax) - The Russian economy is now in a period of managed cooling, where the main risks are the labor shortage, changes in the structure of budget spending and tight monetary policy, Deputy Prime Minister Alexander Novak said.
The key challenge is to increase labor productivity, otherwise Russia will not manage to achieve sustainable economic growth, Novak said at the Sberbank business breakfast at the St. Petersburg International Economic Forum.
"Today we're in a situation where, after rapid growth, since the economy is cyclical, we're in a period of so-called managed cooling," he said.
"Of course, with the cyclical nature of the economy it's important to manage risks, look for new drivers that provide additional ability to attain a sustainable trajectory for economic growth," Novak said.
"If we're talking about risks, one of the most significant is the labor shortage and the growth of labor productivity lagging behind wage growth. We see that there needs to be a shift from non-productive sectors to sectors that generate higher added value, it is necessary to increase the flexibility of the labor market," Novak said.
"The second fairly serious factor that we need to look at and mitigate is the risk of changes in the structure of budget spending. In recent years there have been very substantial injections of budget investment in the economy, in technological development, in the social sector. The structure has changed, among other things spending on security and defense has increased," he said.
"And what the government is doing today on consolidating the budget, prioritizing spending is an important component for creating the conditions for economic growth and possibilities for lending to the economy," Novak said.
"Another risk is high inflation, tight monetary policy. This is a consequence, in part, of the continuation of those risks that we define as key ones," he said.
"What is the government doing to ensure a new trajectory of sustainable economic growth? With cyclicality, structural changes are always happening. And the government has approved a plan for structural changes in the economy," Novak said.
Foremost this refers to changes in the structure of employment, engagement of young people, people of retirement and near-retirement age and veterans of the military operation in Ukraine, and increasing the flexibility of labor, he said.
"The key issue that is certainly on the agenda today, that should provide a change in structure, is growth of labor productivity. This must become a national driver, all businesses need an increase in efficiency...Without this, structural changes in the economy will not give us sustainable growth," Novak said.
