President V.Putin’s speech at the Forum accorded notable importance to the issue of some of the key qualitative aspects of Russia’s longer term development, in particular with respect to the challenges of skills shortages and to create the right conditions for young talent to develop and contribute to the growth of the economy.

       This year’s Economic Forum in St. Petersburg was widely seen as more of a success compared to last year due to the greater turnout of key figures from the world of business and politics. But aside from the discussions about the turnout of corporates and contracts, such gatherings are also crucial in terms of gauging the policy vectors emerging in Russia as well as globally. In this respect, one of the encouraging factors was the recognition of the importance of qualitative aspects of growth (rather than growth figures per se) as well as the centrality of human capital development that should serve as the paradigm of Russia’s modernization going forward.

       In the economic debates at this year’ s Forum one of the highlights was the Economists’ Roundtable, which focused on the global growth prospects for the next 5 years and gathered some of the most prominent economists and policymakers on global and Russia’s specific issues of growth performance. Among the 11 participants at the Economists’ Roundtable there were Kenneth Rogoff, Harvard University professor of Public policy, as well as Ksenia Yudaeva, First Deputy Head of the CBR, and Deputy Finance Minister Maxim Oreshkin.

       In terms of the growth outlook for Russia and the world, the tone of discussion overall was subdued with the growth performance of the global economy in 2016-2020 largely expected to be in line with the not-so-stellar pattern of the past 5 years. One of the key factors accounting for the cautious outlook on the global front was the expected deceleration in China – most of the respondents predicted China’s growth to reach just 5-7% in the next 5 years, with none of the economists at the Roundtable expecting growth to return into the double-digit range. Incidentally, there was a surprisingly high share of respondents who saw Asia as one of the key vulnerabilities for global growth in the next 5 years – more than 40% believed that Asia could pose risks to global growth performance, while close to 55% of the total saw the bulk of such risks residing in the Eurozone.

       Even as Asia and Europe were seen as the source of risk, the US was singled out as the most promising region in driving global growth in the next 5 years – more than a third of the participants of the Roundtable chose the US, with BRICS and APEC obtaining less than a third each. This view of the future drivers of growth differed notably from the results of the audience poll, which revealed that more than 50% of the respondents favoured the BRICS. The question that elicited a strong alignment in the views of the audience and the Roundtable participants was on the future growth trajectory of Russia – the majority in both cases favoured growth rates of 2-4% in the next 5 years, with notably more respondents seeing Russia’s growth at less than 2% compared to the share of those that expected more than 4% growth.

       Among the causes of the global economic slowdown in the post-crisis period one of the most popular was high indebtedness, which was followed by the decline in labour productivity and demographic factors. In terms of the necessary policy responses to the global economic slowdown, nearly 30% of Roundtable participants favoured labour market structural reforms, with more than 20% also calling for greater trade liberalization. Interestingly, despite concerns over leverage and indebtedness as barriers to growth, just over 5% of Roundtable participants called for changes in monetary and fiscal policies as the main way of attaining higher global growth.

       Overall, the conclusions from the panel of economists summarized in the poll seemed to point towards the standard prescriptions of structural reforms to address the waning dynamism of the global economy. Nonetheless, the discussion itself was far more nuanced, featuring issues such as the record high levels of income inequality in the world economy, the ability of capitalism to use crises as a source of innovation and greater dynamism as well as discussions on the relevance of import-substitution, weak currencies and industrial policy in boosting growth. Furthermore, one of the key strands of discussion at the Roundtable was the importance of human capital for sustaining growth in the future – indeed one of the factors that may have accounted for the decline in productivity and growth was the underinvestment into human capital development in both emerging and developed markets.

       On a related note, some of the speakers emphasized the importance of the quality and sustainability of growth over sheer quantitative figures in the short term. This in turn echoed the earlier statements made by Deputy Prime Minister Igor Shuvalov, who underscored the importance for Russia to be guided more by the quality of growth rather than being obsessed with short-term growth figures. The quality of growth in turn is predicated on a superior quality of economic policy, which is increasingly a concern for the world economy, due to the weakening of economic policy rules (such as fiscal and monetary policy rules), the ad hoc expansionism of the state (including in the area of financial sector regulation) as well as the rise of protectionism. Similar concerns are on the rise in Russia, where the set of economic policy rules (monetary rule of inflation-targeting, fiscal rule and structural anchors associated with WTO commitments) has been weakened in the aftermath of the shocks sustained last year.

       Lastly, President V.Putin’s speech at the Forum accorded notable importance to the issue of some of the key qualitative aspects of Russia’s longer term development, in particular with respect to the challenges of skills shortages and to create the right conditions for young talent to develop and contribute to the growth of the economy. Whether this indeed points to a new turn in Russia’s economic policy that starts to accord greater priority to human capital development remains to be seen. One of the potential clues will be the evolution of Russia’s fiscal policy and the relative importance ascribed by the government to financing items such as education and healthcare, which in turn serve as the basis for human capital development in the longer term.

       Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.