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Factors determining Russia’s long-term growth rate

This paper’s main conclusion is that Russia’s economy cannot grow at the pace recorded in the early and mid-2000s because of the different external environment, the different stage of development and serious demographic headwinds.

By: Date: January 16, 2020 Topic: Global economy and trade

In the decade of the 2010s, the pace of economic growth in Russia slowed down to an annual rate of below 2% and most forecasts suggest that this is will be the new “normal” for the Russian economy at least in the medium-term. While politically and socially disappointing, such a growth slowdown is unavoidable due to adverse demographic trends.

A combination of a shrinking working-age population and population aging must lead to a lower growth pace as compared to the period when the working-age population was still increasing and the effects of population aging were limited (the decade of the 2000s).

Compensatory measures such as a gradual increase in the retirement age and an open labor migration policy, although economically positive, can only partly mitigate the negative effects of a shrinking domestic labor force. In this respect, Russia does not differ from other European countries and some Asian countries.

However, demography and shrinking labor supply cannot fully explain low potential growth. Stagnation in total factor productivity is another reason. It results from a poor business and investment climate, difficulty in diversifying away from the dominant role of the hydrocarbon sector, and deteriorating political and economic relations with the US and EU which limit trade, investment and innovation opportunities. To increase its potential growth, Russia needs comprehensive economic and institutional reforms that, in turn, will be conditioned by political reforms and by improved economic and political relationships with the US, the EU and Russia’s neighbors.

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European governance

Does the war in Ukraine call for a new Next Generation EU?

The European Union should take significant economic measures in response to the war in Ukraine, but a new Next Generation EU is not needed yet.

By: André Sapir Topic: European governance Date: May 17, 2022
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A sanctions counter measure: gas payments to Russia in rubles

A requirement for gas to be paid for in rubles is a way for Russia to side-step central bank sanctions.

By: Maria Demertzis and Francesco Papadia Topic: Global economy and trade Date: April 19, 2022
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Opinion

War on Ukraine: the day after

The international community will have to restart the long process of de-escalation in order to preserve peace. We have a long climb ahead.

By: Maria Demertzis Topic: Global economy and trade Date: April 5, 2022
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Opinion

Early Warning Brief: China’s contorted response to Russia sanctions

The spectre of a democratic Russia aligned with the West is probably a more serious concern for Beijing than what it risks losing by supporting Russia, which is exactly why China has arrived at its contorted position on the current military conflict in Ukraine.

By: Alicia García-Herrero Topic: Global economy and trade Date: April 1, 2022
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Opinion

China can see the limits of bailing out Russia's economy

Beijing will support Moscow as long as it does not fall foul of Western sanctions.

By: Alicia García-Herrero Topic: Global economy and trade Date: March 16, 2022
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Six reasons why backstopping Russia is an increasingly unattractive option for China

China has too much to lose from aligning with Russia over Ukraine.

By: Nicolas Véron and Alan Wm. Wolff Topic: Global economy and trade Date: March 15, 2022
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European governance

A new Thessaloniki offer: the aspirations of Georgia, Moldova, and Ukraine to join the EU

The European Union should grant candidate status to Georgia, Moldova and Ukraine, as part of a long-term stabilisation strategy.

By: Marek Dabrowski Topic: European governance Date: March 15, 2022
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European governance

How should the EU respond to Georgia, Moldova and Ukraine’s membership aspirations?

European Union membership for Georgia, Moldova and Ukraine is at present unrealistic, but they should be offered more than Association Agreements.

By: André Sapir Topic: European governance, Global economy and trade Date: March 14, 2022
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Opinion

How Europe can defeat Russia’s divide and rule strategy in the long term

The European Union will have to bolster members most vulnerable to Russian blackmail and rethink the structure of European energy markets in order to effectively counter Putin.

By: Simone Tagliapietra and Guntram B. Wolff Topic: Global economy and trade, Green economy Date: March 10, 2022
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Can China bail out Putin?

Even with help from China, Russia will be unable to mitigate the immediate impact of Western sanctions.

By: Alicia García-Herrero Topic: Global economy and trade Date: March 9, 2022
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Preparing for the first winter without Russian gas

The European Union can manage without Russian gas next winter, but must be united in taking difficult decisions, accepting that in many cases it won’t have enough time for perfect solutions.

By: Ben McWilliams, Giovanni Sgaravatti, Simone Tagliapietra and Georg Zachmann Topic: Green economy Date: February 28, 2022
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Opinion

China’s economic support for Russia is not a panacea

The EU is still Russia’s largest trading partner, actually several times bigger than China.

By: Alicia García-Herrero Topic: Global economy and trade Date: February 28, 2022
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