Russian economy to face "Iranian" future, analysts say

In the medium term, the Russian economy may face the same risks as Iran, whose GDP remains under pressure from large-scale international sanctions.

Analysts at the Institute of Economics of the Russian Academy of Sciences (RAS) include the threat of stagflation, the "traps" of the fiscal stimulus and the negative consequences of the "resistance economy" among the main vulnerabilities, according to RBC.

Experts predict the continuation of a "stagnation trend with a negative trajectory" combined with high inflation for the Russian economy.

In the future, the country's GDP will continue to remain isolated from the leading global markets, coupled with falling productivity and increasing government spending to overcome the crisis. Against this background, it will be extremely difficult to achieve sustainable growth in the national economy.

Given the systemic sanctions, government demand in the form of orders, purchases and investments will remain the main driver of growth in the Russian economy. However, continued reliance solely on the "budget stimulus" will be "extremely vulnerable", experts warn. In such a scenario, priority sectors of the economy will receive more investment injections than others, and the overall growth of government spending will not allow to count on a significant increase in state support on a stable basis.

Analysts called the negative consequences of the so-called "resistance" policy pursued by local authorities, similar to Iran, another risk for the Russian economy. Among the main threats from such a course, experts called the inability to get away from "raw materials specialization" due to technological limitations, as a result of which an increasing number of enterprises will use outdated equipment. The emphasis on the diversification of exports from West to East makes the Russian economy dependent on demand from Asian countries.

"The Eastern partners pragmatically use the fact that the new markets are needed by the sub-sanctioned economy more than they need it," the RAS experts concluded.