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Putin discusses Russia’s economy growth with ministersBusiness & Economy September 24, 2:38
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Russian Northern Fleet completes drills in ArcticMilitary & Defense September 22, 18:01
The weak infrastructure in Russia and its continued wear and tear hold back the country's economic growth, increase production costs, and bring down the standards of living. Experts estimate that investments in transportation, industrial, utilities and other types of infrastructure need to go up by at least 1.5 times just to halt its ageing. Given the long payback period of infrastructure projects, the search for investment in this area is becoming a crucial task against the backdrop of the budget deficit and Western sanctions.
A high rate of fixed assets depreciation is one of the key challenges the Russian economy is facing. According to the Federal State Statistics Service, in 2008–2015, it increased from 45.3% to 47.7%, including 50.4% in construction, 55.8% in transportation, and 44.5% in natural gas and water production and distribution. All these figures primarily refer to the infrastructure.
In its Russia Economic Report, the World Bank notes that Russia needs major infrastructure investments in order to speed up its economic growth: "Russia’s public expenditure on infrastructure amounted to less than 1.0% of its GDP a year in 2012–2014, while the investment needs are estimated to be at about USD 1 trillion or 75% of Russia’s 2015 GDP."
The New Economic Growth Business Partnership has calculated that infrastructure investments need an annual growth of about 1.7% of the GDP (by ca. RUB 1.5 trillion a year), which is 1.5 times as much as the current level of expenditure (about 3.5% of the GDP). By contrast, McKinsey Global Institute estimates that China spends 8.6% of its GDP on infrastructure, India – 4.9%, Oceania and the developed nations of Asia – 4.6%, and Eastern Europe – 4.1%.
A key challenge with regard to Russian infrastructure projects is the crisis-induced capital shortages.
Government officials and experts are trying to address this issue by harnessing public–private partnerships and concessions and raising capital from non-state pension funds (NPFs), insurance companies, and investment funds.
Engagement of foreign partners in infrastructure development projects is also an option: