Western sanctions intended to cripple the Russian economy have instead opened up a range of new opportunities over the last year and a half, experts told Sputnik.
However, the country is still in a process of transition and Moscow must ensure its market environment is sufficiently attractive to non-European investors.
At the St. Petersburg Economic Forum, Russian President Vladimir Putin described how Russia’s turn toward African and Asian economic partners was well underway by the time the West imposed economic sanctions on Russia in early 2022.
The trend is part of a global dynamic of moving toward a multi-polar world order and away from one centered on Europe and the United States.
Economic experts told Sputnik that while the Russian economy is already an attractive place to invest, Western sanctions were still intimidating many potential partners.
They also noted that this could be counteracted by taking further actions to stabilize Russian markets and by deepening Russia’s relationship with other nations, especially other BRICS partners.
We opened the doors to international partners a long time ago, since 2014, after the first wave of sanctions that were imposed against the Russian Federation by unfriendly countries.
And we see that foreign partners from friendly countries have not been entering our market very confidently. They are still afraid of sanctions from countries that are unfriendly to us.
We heard very precisely in Putin’s speech that import substitution is developing very poorly, and many countries which could have filled the void after some companies left Russia have yet to enter Russian markets.
This movement on the part of Western partners of friendly countries does not occur. And he says that we are specifically allocating huge funds for organizing import substitution of goods and services within the country.
And we are talking about the role of VEB as a guarantor of this movement.
We see the allocation of budgetary funds for the implementation of these projects, to stimulate activity on the part of entrepreneurs, to enter into these projects to replace goods and services – that is, those firms that have left Russia.
On the subject of inflation, which has not plagued Russia as it has Western nations, Solabuto noted that mitigation efforts have been successful in spite of the very great pressure” the West has attempted to put on the Russian economy via sanctions.
He noted that with inflation of the ruble at just 2.9%, there is almost five times as much in the Eurozone and USA, the latter of which is only recently seeing such low inflation numbers.
They say about our national currency, our economy, and our country that we are protected from external storms, [that we are someone] who can walk the global market, and thus we are protected.
In his speech, Putin noted that Russia has the potential to become a supply economy on the global stage. This, Solabuto explained, is the opposite of what the USA does as a demand-side economy.
The whole strength of the American economy, despite being an economy of demand, rests on the fact that the dollar is still perceived by many countries as the main reserve currency.
Russia’s path toward this goal would include the construction of enterprises within the country that will produce more goods and services, including replacing those products that we used to import from overseas.
These goods and services will be produced for domestic demand and will also be supplied abroad. China has already walked this path, and as a result, China has received the name ‘World Factory’.
China produces goods that the whole world consumes – and we will most likely have about the same model after we have completed the process of import substitution.
For new partners, for the BRICS [Brazil, Russia, India, China, South Africa] countries, the Russian market may be of interest because of its size.
BRICS partners can use the increase in activity in Russia to also increase their economic presence in the countries of Russia’s economic partners, Lissovolik noted, adding that trading in national currencies of BRICS nations would further increase investment.
The main factor now, from the point of view of macroeconomic tasks for Russia, is the stimulation of economic growth. Last year there was a relatively moderate decline, but still a decline. Growth is expected this year.
But of course, for Russia it is necessary to increase the pace of economic growth. And the thesis that was voiced at the St. Petersburg Economic Forum regarding the development of supply-side economics.
It is aimed primarily at activating and accelerating economic growth.
The concept of supply-side economics suggests that it is precisely through measures to stimulate output, to stimulate the production of goods, that higher rates and more sustainable economic growth are achieved.
At the same time, the key benchmarks of the supply-side economy involve tax cuts and stimulating economic growth by supporting employment through measures, including in the labor market, which make it possible to use the available resources in the economy to a greater extent to increase output.
And, in fact, this kind of concept, which involves lowering administrative barriers and lowering taxes for business in order to achieve higher economic growth rates, seems like it will be gaining more weight in the economic strategy for the near future.
Sputnik / ABC Flash Point Global Business News 2023.