Economic Analysis: Theory and Practice
 

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On the baseline scenario sustainability for economic growth in Russia

Vol. 18, Iss. 5, MAY 2019

Received: 29 January 2019

Received in revised form: 15 February 2019

Accepted: 25 February 2019

Available online: 30 May 2019

Subject Heading: ECONOMIC ADVANCEMENT

JEL Classification: C51, C54, E17

Pages: 837–854

https://doi.org/10.24891/ea.18.5.837

Balashova S.A. Peoples' Friendship University of Russia, Moscow, Russian Federation
sveta.b2@gmail.com

ORCID id: not available

Subject The article considers scenarios of economic development of Russia.
Objectives The purpose is to assess the sustainability of the baseline scenario of Russian economy development in the medium term based on a simple growth model.
Methods I use the neo-classical Solow–Swan model to forecast the economic growth rate. To assess the dynamics of the total factor productivity (TFP), I offer a model, taking into account the export orientation of the Russian economy. The equation system contains equations for commodities exports and non-resource exports, and an equation for investment behavior. I apply econometric tools to evaluate the parameters of the equation system and make projections.
Results The developed simple growth model predicts a 1.5 to 2 percent GDP growth over the next five years, provided that the main trends and relationships remain. The baseline scenario does not show a significant increase in the total factor productivity. Therefore, the main drivers of growth are labor efficiency and external market.
Conclusions The economic development in the baseline scenario depends to a large extent on the quality of human capital and ability to use it. There is no any margin of safety, if there is no growth in human capital and the TFP. The findings should be taken into account while developing the economic policy in the face of the new reality. It is crucial to develop a baseline scenario, which rests on the model of endogenous growth.

Keywords: forecasting, economic growth, baseline scenario, GDP growth, sustainability

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