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Capital flight and capital outflows from Russia: symptom, cause and cure
Capital flight is a fuzzy and unhelpful concept. Russian capital outflows
should be analysed in a wider context involving all major determinants of the
risk and return faced by Russian savers and investors. Building saver/investor
confidence and strengthening the credibility of policies and institutions are
preconditions for enhancing the quantity and quality of domestic capital
formation in Russia. As reforms progress (financial sector reforms and a
fundamental overhaul of the public administration are key), Russian ‘capital
flight’ is set to decrease gradually. Even so, it will remain a feature of the
economic landscape for many years. Sharp one-off reversals in net capital
flows could disrupt the macroeconomy. A capital repatriation amnesty could
prove counterproductive.
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