"New policies are necessary to achieve a recovery in productivity – with a focus on the regulatory regime for businesses, infrastructure and connectivity, constraints on innovation by firms, and skills development for individuals," the World Bank said in a statement after releasing its Pathways to Inclusive Growth Systematic Country Diagnostic report for Russia.
The paper, presented at the 2017 Gaidar Forum in Moscow, stressed that Russia must revive its productivity by removing constraints such as rules favoring incumbent market players, non-tariff import barriers and regulations stifling competition, as well as developing its "feeble" financial market.
Such measures would enable productive firms enter the market and allocate factors of production more efficiently, the World Bank said, emphasizing that this would boost jobs and income for the bottom 40 percent of the Russian population.
An emphasis was also placed on improving governance and fiscal policy, boosting innovation and skills, reducing premature mortality, improving health, and avoiding natural resource depletion.
"It is vital that Russia start now, before inequalities and vulnerabilities worsen under the pressing fiscal challenges resulting from lower commodity prices, before demographic changes grow to represent too big a strain on labor market demands and fiscal resources, and before the opportunity to reinforce the results of a decade of successful growth fades away," the World Bank concluded.
The report comes as Russia emerges from a two-year recession that began amid collapsing commodity prices and Western sanctions. In 2016, Russia's economy is estimated to have grown by just 0.5 percent after contracting almost 4 percent the previous year. The first three quarters saw negative growth rates before a slight GDP increase in the fourth quarter. The Economic Development Ministry's 2017 baseline scenario forecast is a GDP increase of 0.6 percent.