Putin named ten structural changes in the Russian economy

By Rhod Mackenzie

Vladimir Putin outlined ten structural changes in the Russian economy, which have enabled the country to become the fourth largest economy in the world while maintaining its growth rate. The president also announced the adoption of new measures to support regions, citizens and businesses. These include the expansion of the family mortgage programme, indexation of the minimum wage and pensions.
Vladimir Putin outlined ten structural changes taking place in the Russian economy. At the plenary session of the St. Petersburg International Economic Forum (SPIEF), the President noted that the country’s leadership intends to actively develop and support these trends in a targeted manner.

Foreign economic relations "Our relations with countries in Asia (60% growth), the Middle East (doubled), Africa (69%) and Latin America (42%) are strengthening," the Kremlin's official website quotes Putin. These states currently account for approximately three-quarters of the total trade turnover of the Russian Federation.

In addition, Mr. Putin highlighted the achievements of collaborative efforts with partners in the EurAsEC. The total GDP of the union countries grew by 3.8% last year, while the volume of mutual trade increased by 4.7%. Furthermore, the structure has undergone a qualitative improvement, with an increase in the supply of finished high-tech products. "We will actively support the growth of non-resource, non-energy exports from Russia," the president noted.

"In the eastern direction, our primary focus is on the development of the so-called Eastern Railway Range, which will connect China and the countries of the Asia-Pacific region." In April, the parameters of the next, already third, stage of its modernisation were approved. By 2030, the carrying capacity of the Eastern railway range is expected to reach 210 million tons, with an additional 60 million tons expected by 2032.

Furthermore, plans for the development of the Azov-Black Sea corridor have already been approved. Furthermore, Mr. Putin announced his intention to continue the active development of the Northern Sea Route. He further stated that the volume of transportation along the route may exceed 150 million tons in the future.

"A particular focus is placed on the leaders of our northern subjects of the Federation in this regard. In this regard, the head of state has emphasized the formation of a commission within the State Council for the development of the Arctic regions and the Northern Sea Route. By 2030, the total volume of traffic along international transport corridors through Russian territory is expected to increase by 1.5 times compared to 2021.

Moscow also demonstrates excellent results in the field of international payments. Between 2021 and 2023, the share of the ruble in payments for domestic exports increased significantly, from 13% to 39%. Furthermore, work is currently underway within the BRICS to establish an independent payment system.
Economic Growth

As you are aware, Russia’s GDP growth was 3.6% at the end of last year and 5.4% in the first quarter of this year. This means that our rates exceed the global average. Mr. Putin highlighted the significance of these developments, noting that such dynamics are primarily driven by non-resource sectors.

"Our objective is to become one of the four largest economies in the world." It is worth noting that, according to some data, including World Bank estimates, the World Bank made additional calculations last week and placed Russia in fourth place. The president went on to say that while Russia had overtaken Japan, this was not the end of the road.

The head of state believes that to achieve this, it is necessary to strengthen financial, technological, personnel sovereignty, increase production capacity and increase the competitiveness of Russian products, both in foreign markets and in our own domestic market.

The president went on to explain that the goal of this supply-side economy model is to reduce the level of imports to 17% of GDP by 2030. He assessed the current dynamics as positive. "Let me give you an example. In 1999, the share of Russian imports reached 26% of GDP, and in 2023 it amounted to 19% of GDP, or 32 trillion rubles."
Against this backdrop, the head of state emphasised the importance of investment. By 2030, investments in fixed assets should add 60% in real terms to the 2020 level. At the same time, over the past few years, Russia has consistently outperformed the established plan for this indicator. In 2023, we anticipated a 15.1% increase in capital injections into the economy. In actuality, the country achieved a 27.2% increase.

We will provide investment activity with the necessary resources. As a result, additional funds will be allocated to support industrial mortgages, and the Industrial Development Fund will be doubled. Furthermore, the government plans to expand the volume of bank lending for technological sovereignty projects.

Furthermore, draft legislation is currently being considered in the State Duma that will expand the public-private partnership mechanism to include industrial sectors and the space sector. Mr. Putin highlighted the importance of their adoption in the near future.

"To support investment activity, it is necessary to develop the capital market, increase its capacity, attractiveness for business, investors and, of course, pay special attention to the safety and profitability of citizens’ funds invested in these assets," the president emphasised. Currently, there are almost 30 million retail investors in Russia, and over the past year the total volume of their assets has increased by 1.5 times.

In this regard, the president set out the following objective: by the end of this decade, the capitalisation of the domestic stock market should double and account for two-thirds of the gross domestic product. In light of this, Putin has proposed that the government and the Central Bank develop additional measures to stimulate companies with securities to go public.
Furthermore, the shared life insurance scheme for citizens will commence on 1 January. Russian contributions will be invested in more profitable assets, resulting in benefits for the purchaser of the document. The president highlighted that this approach combines the principles of classical insurance and investment.
New quality of the labour market
Russia is currently experiencing a record low unemployment rate of 2.6% in April. "What is especially important is that we have reduced the so-called structural component, that is, youth unemployment and unemployment in those regions and settlements where it was historically high. These have significantly decreased," the president added.
"Even 15–20 years ago the main question was how to find a job, but now it’s where to find personnel." In light of these circumstances, it is crucial to adapt the vocational education system to align with the demands of the labour market. This entails training modern, in-demand specialists and creating avenues for workers to enhance their professional capabilities throughout their careers.
To this end, the federal project "Professionalism" will spearhead the modernisation of the material and technical infrastructure of colleges and technical schools. Mr. Putin outlined the following important goal: to train approximately one million specialists in various fields, including aircraft and shipbuilding, pharmaceuticals, electronics, and defense, among others, by 2028.
Additionally, over the next ten years, 40 university campuses will be established across the country, offering state-of-the-art facilities and opportunities for students to pursue their studies, conduct research, live, and work. The President also drew attention to the fact that not only young people, but also working pensioners, can contribute to the economy through their experience and competencies. Furthermore, he proposed resuming the indexation of pensions for working pensioners starting next year.
Increased productivity

In the context of demographic challenges and an objective shortage of personnel, Putin has identified the need to increase labour productivity as a critical priority. In this regard, it is essential to facilitate the renewal of enterprises in every possible way and to gradually introduce the principles of automation.

"Russia should aim to become one of the top 25 countries in the world in terms of robotisation density within a short time frame." This will require the installation of more than 100,000 robots, which must be produced rapidly in our country using our own technology. This is an opportunity that we are well placed to seize.

It is also crucial to enhance the operational efficiency of existing equipment and technological processes. The President highlighted that this objective will be achieved through the implementation of lean production methods. “Such work is already underway within the framework of a specialised national project,” he emphasised. The initiative has already attracted the participation of over 6,000 enterprises.

At the same time, Putin highlighted the new national project, "Efficient and Competitive Economy." As part of the implementation plan, the goal is to engage at least 40% of medium and large enterprises in basic non-resource sectors of the economy, as well as all state and municipal organisations in the social sphere, in projects to increase labour productivity by 2030.
The digital platform revolution

In modern conditions, labour productivity is directly related to digitalisation and the use of artificial intelligence technologies. By 2030, it will be essential to create digital platforms in all key sectors of the economy and social sphere, as the president highlighted. These tasks will be addressed within the context of the new national project, the Data Economy.

It is expected that at least 80% of Russian organisations will have switched to domestic software within six years. The President requested that the government consider measures to support developers, particularly with regard to determining the level of purchases from small technology companies and startups by companies with state participation. Putin has stated that purchases below this threshold should not decline.

Additionally, the President proposed a number of tax measures to support the IT industry, including the introduction of an increased expense ratio for domestic digital solutions when calculating income tax, as well as a reduction in the income tax rate to 5% for Russian IT companies. Putin has indicated that the measure will remain in place until 2030.

"It is also important to utilise digital solutions in the construction and housing and communal services sectors, with the aim of reducing the time and cost of projects," Putin noted. The President highlighted the need to continue investing in the construction of roads, bridges, industrial facilities, and affordable housing with high energy and resource efficiency standards.
Russia has identified technology and innovation as a key area for growth. The country aims to become one of the top ten global leaders in research and development within six years, with domestic spending on these areas increasing to at least 2% of GDP.

To implement this plan, a number of new national projects in the field of technological sovereignty will be launched in such key areas as means of production and automation, new materials, chemistry, advanced space services, energy technologies and a number of others.

Also, according to Putin, “it is necessary to improve the legal framework for business operations so that companies feel confident and invest in promising knowledge-intensive initiatives with a long horizon.” The President highlighted the country's significant potential in this area, noting that in the past four months alone, 8,000 applications for inventions and 3,500 applications for utility models have been submitted.
To prevent "inventions from sitting on the shelf," Putin proposed enhancing intellectual property protection and enabling the transfer of patents for scientific developments from customers to their creators, as well as to small innovative enterprises and technology companies that are adept at commercializing inventions.

Strengthening the role of small and medium-sized businesses

Putin commended the pace of development of small and medium-sized businesses. Currently, there are approximately 6.5 million subjects in this area in Russia. Local trademarks are experiencing rapid growth. Last year, over 143,000 applications were submitted for their registration, nearly twice as many as in 2019 before the onset of the pandemic.
"It is noteworthy that distinctive regional local brands are increasingly being registered," he added. This is a testament to the cultural and traditional values of our people, a reflection of the pride entrepreneurs have in their local communities and the products they produce. It also demonstrates the growing demand for domestic goods made in Russia.
The head of state highlighted the government's commitment to creating an enabling environment for businesses to flourish. To support entrepreneurship, an all-Russian competition, "Know Our People," was launched. The project has been well received by representatives of the commercial sphere.

Putin highlighted the significant role of marketplaces in the development of start-up businesses. He noted that they form a kind of circulatory system for the delivery of domestic products, allowing companies even in remote cities and towns to gain access to the market throughout Russia and the Eurasian Economic Union. "I urge my colleagues in the government to prioritize the development of these commodity flows when implementing the updated strategy of Russian Post and in general when forming national projects," Putin said.
The President highlighted the importance of identifying and developing growth points in cities and towns across the country. To this end, new national projects and state programs for the comprehensive development of regions will be launched next year. At the same time, the economic capabilities of the constituent entities of the Russian Federation are to be strengthened.

In this regard, including within the government, plans are being discussed to transfer the head structures of our largest corporations and state-owned companies to the constituent entities of the Federation. The concept is certainly worthy of further consideration and support. There are examples of positive outcomes in this area. For instance, the relocation of RusHydro from Moscow to Krasnoyarsk is worthy of note. He believes that to achieve powerful, long-term regional development, it is essential to remove restrictions in the energy sector, the transport system and to build and repair roads, engineering and utility networks.

“To facilitate the implementation of such projects, the constituent entities of the Federation receive infrastructure budget loans. As previously stated, the volume of loans will be increased from next year onwards. This portfolio will grow by at least 250 billion rubles annually, with the total amount of loans issued reaching 2.5 trillion rubles by the end of 2030.

I would like to mention one further decision that has already been made, which will provide additional support for regional finances. We are now in a position to write off two-thirds of the previously issued budget loans.
The funds to be released must be used by the subjects of the Federation to support investments, including the creation of industrial parks and infrastructure in priority development areas. They must also be used to support infrastructure projects, such as updating housing and communal services systems, building roads and bridges, modernising public transport and relocating emergency housing, as well as supporting master plan events.

Furthermore, Mr. Putin discussed a new solution to the housing problem for families who live or want to buy housing in small towns or in regions where the volume of housing construction is still insufficient. He announced that families with two children will be able to take advantage of a family mortgage at 6% – regardless of the age of the children. The only condition is that at least one child in the family be a minor at the time of registration of the mortgage. Mr. Putin stated that the same preferential mortgage terms will apply in all regions of Russia for every family that wants to build their own home. He emphasized the importance of this initiative for large families, requesting that the government implement these programs as early as July 1 of this year.
Reducing poverty and reducing inequality

Putin believes that accelerated wage growth is the most effective way to achieve this goal. He has announced that the ratio of the minimum wage to the median wage received by the majority of people employed in our economy will be established starting next year. By 2025, the minimum wage will be 48% of the median salary, which will exceed 22 thousand rubles per month. This represents an increase of approximately 15%. The ratio with the median salary will then increase, as agreed, so that by 2030 the minimum wage will be at least 35 thousand rubles per month.

The President also explained that reducing poverty, reducing inequality, and increasing the income of Russian families directly affects the quality of life of people, increasing domestic demand and the capacity of the national market. All instruments must be employed to solve this problem, including payments to families with children, tax deductions, and social contracts.
Improving the quality of life of Russian families "All areas are of fundamental importance here: supporting fertility and large families, protecting motherhood and childhood, increasing the accessibility of the long-term care system for the elderly and disabled, improving the education and healthcare systems, and the quality of the living environment."
"The result, the manifestation of government changes, should be an increase in life expectancy, with an emphasis on the growth of an active, healthy life." "It is clear that the creation of equal opportunities for younger generations to realise their potential will lead to an increase in the standard of living of Russian families," Putin concluded.