Putin Aims to Revive the Economy With a Plan. And Pianos. – The New York Times

MOSCOW — Even as Russia has muscled back onto the world stage politically, its economy suffers from flat growth and shrinking incomes.

President Vladimir V. Putin has a plan to change that — and it involves pianos.

Kremlin officials say they will use an important investor conference opening Thursday in St. Petersburg to promote a new, six-year $400 billion stimulus plan, covering a dozen sectors of the economy. There are some classic big-spending efforts, like building roads and airports. And then the plan gets creative.

It calls for Russia to buy 900 pianos and build 50 covered ice rinks. Russian scientists will, by 2024, publish 200 articles on genetics in top-rated journals, the plan states.

Critics are calling it a step backward that would expand the state’s role in economic decisions, down to the level of purchases by classical music schools. They likened it to Gosplan, the planned economic model of the Soviet era, and it comes a few months after businessmen in Russia were told to rally behind the state and increase capital investments. It is also another effort by Russia to work around American and European sanctions.

The plan predicts the measures will buoy Russian society, reduce poverty by half and increase the average life expectancy to 78 years from 73.

In an interview to discuss the projects, Russia’s economy minister, Maksim S. Oreshkin, scoffed at comparisons to Soviet-era planning and said the new effort was innovative and good policy.

“We have set very ambitious goals,” Mr. Oreshkin said. “Economic growth is only one of them. We have set many others that will directly affect the quality of people’s lives.”

This is the latest pivot in Russia’s zigzagging post-Soviet economic history. The Kremlin has been struggling in the past decade to put its financial house in order as oil prices have fallen and, also painfully, sanctions were imposed after it moved into Ukraine in 2014.

Russia has run a budget surplus as a precaution against future sanctions and used its oil supply as a safeguard. By law, for example, when oil costs more than $40 per barrel, taxes generated on all revenue above that level must be saved in sovereign wealth funds, rather than spent on, say, teacher salaries or the army.

Russia now has almost $500 billion in reserve, a cushion that will help protect the federal budget from future sanctions or an oil price slump. But economists say that effort has translated into miserly economic growth because it withdrew money from the economy. So far this year, the gross domestic product, a common gauge of economic health, expanded at a rate of 0.5 percent, while real disposable incomes fell by 2.3 percent.

The National Projects is a plan, like others in the past six months, to shift emphasis from consumer demand to state-led investment as a source of growth. Even a 110-page long summary version is laden with mind-spinning numbers.

It stipulates the state’s role in achieving the goals with precision. It says, for example, that the number of Russians who regularly practice sports should rise to 55 percent from 36.8 by 2024.

The economic minister sees that minutiae as helpful.

“The tasks before us are objective and correct tasks,” Mr. Oreshkin said in an hourlong interview. “We achieved a deeper understanding of how goals from the micro level form the overall numbers.”

Mr. Oreshkin said the stimulus effect should kick in later this year, raising the annual economic growth to 3.1 percent for 2021. This week’s forum in St. Petersburg will allow “deep discussions on concrete directions of development on National Projects” with corporate executives and hedge fund managers, he said.

Russia remains committed to attracting private investment, too, he said, and the government has “a whole complex of measures on improving the investment climate.”

He said there could be a problem: America’s trade wars with China, Mexico and others could slow the global economy, hurting Russia as well.

Independent economists have been scratching their heads over how the plan’s goals will be achieved. Russia raised its value-added tax this year, and economists have questioned how that will create growth, as the taxes were raised before the state stimulus spending began.

“Compared to the West, compared to the United States or United Kingdom or France, the Russian government has the power to squeeze the middle class and the poor far beyond the bounds of what we can imagine,” Kenneth Rogoff, a professor of economics and public policy at Harvard, said in an interview.

“They have a model which is really a textbook example of the natural resources curse, when the state doesn’t need to develop a middle class in order to support itself, support the military and support the elite,” he said.

One stated goal of the National Projects plan is to double the current growth rate so that Russia’s economy expands faster than the global average, seen as important to maintain the country’s status. But many economists say the stimulus spending alone, no matter how many pianos are purchased, will almost certainly fail in this goal. New business activity will pick up only with an overhaul of the court system to protect property rights, they say.

Kirill V. Tremasov, a Moscow investment banker and the author of a popular economics blog, said the government “simply had no other choice.”

“They could stimulate private businesses,” he added, “but the result would be unclear because of sanctions and geopolitical tensions.”

The return of the economic plan continues Russia’s slow, post-Soviet seesaw from privatization to re-nationalization. But without smoothing relations and lifting sanctions, few other options remain.

“They are facing a dilemma. On the one hand, they would like to see more foreign investors coming to Russia,” Vladimir Tikhomirov, chief economist for BCS Global Markets, said. “On the other hand, they do realize a significant problem here is geopolitics, which they don’t want to discuss.”