Quasi-market incentives needed to boost productivity amid lower competition due to foreign players leaving Russian market - economy minister

MOSCOW. Nov 6 (Interfax) - Russian markets are now monopolized to a greater degree since Western companies have left, creating a need for administrative mechanisms and quasi-market incentives to boost productivity, Economy Development Minister Maxim Reshetnikov said in his speech at the Productivity 360 forum.

He said that the forecast of 2.5% annual growth in labor productivity presented a very ambitious task for this year and next year in the midst of a cooling economy.

"We need to understand that at the macroeconomic level, productivity is a characteristic of our economic system. By and large, productivity doesn't grow without competition. We understand that competition is the main driver [of increased productivity]. We need to understand that right now, of course, we are having some issues with this [competition]," the minister said.

"We understand - Western companies have left, and they previously set the tone; now, unfortunately, domestic markets are monopolized to a greater degree. This is a kind of unavoidable measure that we have to live with," Reshetnikov said.

"That is why we need to make changes to the system administratively - if there are no market mechanisms, let's implement some quasi-market mechanisms for a time," he said.

Reshetnikov said that it was important to move forward with the national project on labor productivity, which is aimed at moving from the micro-level of a specific company up to industry level.

He said that productivity in Russia had grown 8.2% over the last seven years, an average of 1%-1.5% per year. "Over the last two years (2023-2024), when the economy was in a stage of fairly lively growth [over 4% annually], productivity rose 2.5%-2.7% per year," the minister said.

"For the next five years, we have targeted a 2.5% growth in productivity each year. Is this a lot or little? Judging by macroeconomic estimates, this is a very high number and a very ambitious task, especially for this year and the next. In a period of economic cooling, when growth amounts to 1%-1.5% each year, 2.5% growth in productivity is a very ambitious figure," Reshetnikov said.