Putin Quietly Drops Goal to Make Russia an Economic Powerhouse

(Bloomberg) -- In May 2018, President Vladimir Putin set out the ambitious goal of getting the Russian economy in the top five globally by 2024. Two years of stagnation later, and he’s quietly dropping the target.

The objective was a political move to try to shore up support in Putin’s final term in office. But a referendum this month gives him the option to run for another two terms after 2024, removing some of the urgency to boost living standards that have taken a fresh hit from the pandemic.

“Goals must be realistic and achievable, that’s what was guiding us,” Kremlin spokesman Dmitry Peskov said on his daily conference call with reporters.

The economy is forecast to contract by 6.6% this year, more than the world as a whole this year, and an expected rebound next year will be smaller. In the purchasing power parity terms that Putin was using as the basis for his target, Russia might topple Germany to get to fifth place in the global rankings this year, but will slip back to sixth place in 2021, according to the International Monetary Fund.

A raft of other objectives that were laid out in a $400 billion investment and development program have been pushed back to 2030 from an earlier target of 2024, according to a Kremlin decree published Tuesday. Targets include reducing poverty by half and reversing a drop in incomes that has left Russians poorer than before Russia’s 2014 annexation of Crimea.

“Some of the goals looked overly ambitious from the start, including the top five economy goal,” said Sofya Donets, chief economist at Renaissance Capital in Moscow.

Prime Minister Mikhail Mishustin last week blamed coronavirus for the decision to delay the National Projects. The government is running a budget deficit this year to pay for increased spending to counter the economic fallout from the pandemic, but has been reluctant to eat into reserves in case they are needed to fight a bigger crisis in the future.

Officials and analysts have long been skeptical about Russia’s ability to meet the targets, in part because the country has a long history of setting very specific goals that are impossible to achieve. The 2030 decree published Tuesday is no exception, with one section setting out an aim to triple attendance of cultural events and another aiming to get 70% of adults to work out regularly.

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