The world is experiencing a severe economic downturn as a result of the pandemic. One of the questions that worries all states today is what economic growth will be when the economy returns to the pre-crisis levels. Will growth indicators have to be revised and what trends will have to be taken into account to avoid falling behind? Answers to these questions were sought during the expert dialogue titled "The Future of Economic Growth" between Kristalina Georgieva, Managing Director of the International Monetary Fund, and Vladimir Mau, Rector of RANEPA. The discussion was held as part of the Gaidar Forum 2021.
Vladimir Mau began the talk by asking what would happen to economic growth. The Rector of RANEPA suggested that "the rapid change of technologies leads to the fact that the traditional measurement of the growth rate simply does not reflect those technologies with which the products are rapidly becoming cheaper. With that in mind, what is going to happen in terms of growth, can we expect high growth rates?"
Kristalina Georgieva replied that it is necessary to focus on what is happening today: "We are now witnessing an unprecedented race to produce a vaccine. But the main goal is to unite the world so that the result of this struggle is the same in different countries. We will address your question in this exact context."
The Managing Director of IMF noted that a return to the economy of 2019 was not what was needed. According to her, it is necessary to build the economy of tomorrow, and to do this, we should take into account the problems that were acute two years ago: "Productivity of labor was low, growth rates were low, inequality was rising, and there was climate change, i.e. the issues that are still on the table today."
Among the challenges ahead, Ms. Georgieva mentioned the need for an even distribution of growth outcomes to avoid inequality. Talking about the global financial crisis, she noted that lessons had been learned from it: "Today, our banking system is more resilient, but not enough." According to the expert, given the current state of things, the banking sector needs much greater stress resistance. This will be facilitated by a transition to a low-carbon economy. Besides, people need to be more educated to know how to get social protection, because one of the features of the pandemic was the protest sentiments that erupted all over the world.
We need to rethink how we measure economic progress because the old approach is outdated, Ms. Georgieva said. The GDP estimation method as a traditional growth indicator needs to be improved. "We estimate that productivity lags the digital economy by about 0.3%. We don't know what to do with those products that are losing their value in the digital world. The second challenge is to broaden the context for assessing national financial performance. And the third task is to determine how to assess the well-being of people so that politicians could make reasonable decisions," Kristalina Georgieva said.
The expert described the results of a wealth distribution study that compared physical capital and financial wealth with human capital. It is human capital that makes up two-thirds of the planet's wealth. It turned out that the other types of wealth is distributed very unevenly: more in developed countries and less in developing countries. "So we need to make sure that the fruits of growth are distributed evenly among everyone," Ms. Georgieva stressed.
Vladimir Mau, in turn, noted that experience shows that economic growth without the increasing well-being is possible. "For example, during the last years of existence of the USSR, the growth rate was accelerating while the well-being was decreasing. Conversely, the opposite is the experience of Japan, where the economy is virtually stagnant and well-being is increasing. We need to understand that well-being is much more important than nominal growth figures," Mau stressed.
Turning to an analysis of the 2020 experience, Ms. Georgieva said that under the conditions of an unforeseen crisis IMF tried to help, first of all, the most vulnerable nations that needed healthcare assistance. "We were doing it a lot more and a lot faster than before. 83 countries have received support from the Fund, many have received emergency funding, emergency subsidies," she said, noting that the support was provided with a view to ensuring that the funds would be enough for a long time.
According to Kristalina Georgieva, it is necessary to spend as much as possible to bring the economy out of the collapse. Consumption and production have been deliberately restricted since the outbreak of the pandemic. That's why it's so important not to take away the aid and benefits that have been provided, while still helping those who have lost their jobs. A lot has been done, and it is important to maintain these results. "Yes, we have now entered a recession. Maybe the worst since the Great Depression. The countries that approached the pandemic with resilient and strong economies were able to weather the shock much better. That is why it is so important to have a solid foundation. And for this, the labor market must be agile, the commodities and services market must be flexible. It is necessary to address the principles of equal access to the fruits of future growth, the principles of equitable growth, green growth. We recommend that all nations create the financial leverage to make their economies more stress-resistant, with less consumption of hydrocarbons. If this is not done, there is a risk of falling behind the train of change," concluded the Managing Director of the International Monetary Fund.
The Gaidar Forum “Russia and the World After the Pandemic” will be held on January 14 and 15 at the Presidential Academy. The Forum will traditionally open the annual business agenda of Russia. In 2021, this large-scale event will be held in a hybrid format, both online and offline.
This time, the main discussion track will be social and economic transformations that have occurred in the country and the world as a result of the COVID-19 pandemic. The expert discussions will be focused on the national and global development goals and the search for practical solutions to the most urgent challenges of today. The Forum’s participants include ministers from the Russian Government, members of the Federal Assembly, governors of the Russian regions, largest world experts, representatives of foreign states.
The general partners of the Gaidar Forum are Gazprom PJSC and Gazprombank JSC.
The strategic partners are Russian Railways OJSC, Johnson&Johnson, ACIG Group, Novartis.
The partner of the forum is MasterCard, Russian Direct Investment Fund (RDIF)
The discussion partners are Magnit, Pepsi, Huawei, Coca-Cola, AstraZeneca, Takeda, EY.
General media partners: TASS, Business FM, RIA Novosti, RBC. Strategic media partners: Interfax, Rossiyskaya Gazeta, Kommersant Publishing House, RIA FederalPress, Invest-Foresight magazine. Main media partners: Anews, News.ru, lenta.ru. International media partners: Russia Today.
Media partners: PRO Business TV channel, AEI PRIME, Polit.ru, Strategy magazine, Public Administration magazine, Ekonomika i Zhizn newspaper, Econs portal, Finam, Bankovskoye Obozreniye magazine, Parlamentskaya Gazeta, Snob media project, Echo of Moscow radio station, Nauchno-Obrazovatelnaya Politika Telegram channel.