Putin: productivity gains must accelerate to shift from raw materials

(Interfax – MOSCOW, October 2, 2013) The current challenge for the Russian economy is the need to accelerate labor productivity gains, since the current slow pace means that the economic orientation on raw materials extraction will continue, President Vladimir Putin said in Moscow on Wednesday at the Russia Calling investment forum organized by VTB Capital.

“For Russia, the main, crucial challenge, is low efficiency,” Putin said.

In terms of GDP, “we are poised to become Europe’s number one economy and the fifth biggest in the world,” he said, adding that Russia is on a par with other countries in the EU in terms of per capita GDP and consumption.

But labor productivity in Russia is less than half the level in the most developed economies.

“That gap between the level of consumption and productivity is dangerous. Living off rents from natural resources, at the expense of future generations, unearned wealth cannot be stable or long term,” Putin said.

That path “is unacceptable for a country that has set big goals for itself, whose environment is an open economy, meaning it must compete for investment, for global markets and for technological leadership.”

“The current pace of labor productivity growth (3.1% in 2012) is not only insufficient to close the gap with the efficiency leaders. In fact it means that the one-sided structure of the economy and its raw materials orientation will be preserved,” he said.

In coming years, productivity must increase by 5%-6% a year, twice the current rate. “Only in this way can we overcome the efficiency gap,” Putin said. “I am confident that we are capable of doing that.”

Individual regions have posted productivity gains of over 10%, he said.

“That result is achieved when efficiency gains, creation of quality jobs, is truly a priority, a real goal, the reason for development, and not some extracurricular, peripheral chore,” he said.