24/10/2017 |

Russia crawled out of recession

President Vladimir Putin (AP Photo/Alexander Zemlianichenko)

The World Bank found that Russia has emerged from a recession. The high prices for oil
and “macrostabilization” helped. The forecast for growth for the current year is 1.7%. This corresponds to the expectations of the IMF and other foreign analysts, but much lower than the government’s forecast (2.1%).

The Russian economy emerged from the recession and returned to growth in 2017. This is reported in the report of the World Bank (WB).

“In the countries of Central Europe and the western part of the Balkan Peninsula, sustained GDP growth continues to be recorded, while Russia and Belarus have emerged from the recession,” the WB said.

Experts of the World Bank expect that the economy of the Russian Federation in 2017 and 2018 will grow at a rate of 1.7% and 1.8%, respectively. The report notes that in Russia and Kazakhstan, inflation has dropped significantly from double-digit rates, which led to a fall in oil prices.

According to the Federal State Statistics Service, for the period from October 10 to October 16, 2017, the consumer price index was 100.0%, since early October, prices have increased by 0.1%, since the beginning of the year – by 1.7%. With a high probability, in October, inflation will fall below 3% year on year. It should be reminded that the target level set by the Bank of Russia is 4%.

The Department of Research and Forecasting of the Central Bank also believes that inflation in Russia could exceed 4% in the medium term.

“There are risks of some excess of 4% inflation in the medium term, which are primarily related to the growth of real wages at a rate faster than the growth rates of productivity. The policy of the Bank of Russia contributes to reducing inflationary risks and fixing inflation at a level close to 4%, “the department said.

Experts have repeatedly noted that the current level of inflation is anomalously low for Russia and carries more risks for the economy than incentives.

The World Bank in its report notes that “high oil prices and subsequent high demand in the domestic market created opportunities for workers in Russia from neighboring countries.”

Bank experts believe that Russia “requires structural reforms to improve long-term growth.” The risks are still the same: a possible drop in oil prices and the expansion of anti-Russian sanctions.

The World Bank’s forecast for Russia as a whole is in line with the expectations of other Western experts. Thus, the International Monetary Fund expects growth in 2017 and 2018 by 1.8% and 1.6%. International rating agency Fitch believes that the Russian economy this year will grow by 2%. The same forecast for the bank Morgan Stanley.

The government’s forecast is the most optimistic – 2.1% in 2017.

“The Russian economy has begun to recover, economic growth has gone, and companies feel it on their own,” says Economic Development Minister Maxim Oreshkin.

Prime Minister Dmitry Medvedev agrees with him. The other day, he once again stated that the Russian economy has entered a stage of growth.

“The Russian economy has completed the adaptation to the new conditions and challenges it faced, and has begun to grow,” he said at a meeting of the Foreign Investment Advisory Council.

According to him, “the key indicators of the gross domestic product, and the volume of industrial production, freight turnover, exports and imports” are increasing. ” “At different rates, but everywhere the dynamics are generally positive,” the Prime Minister is sure.

“We can confidently say that the Russian economy has entered a phase of growth,” Medvedev summed up.

Log in, then she came in, but this growth is still very unstable and small. According to the Ministry of Economic Development, Russia’s GDP has grown by 1.7% in the first eight months of this year. August was better than July, but the September data were not too optimistic.

“Rosstat published the main economic indicators for September, which indicate the formation of an ambiguous picture,” – analysts say Sberbank CIB.

Among the positive aspects, experts note the further acceleration of growth in the agricultural sector, the retail trade turnover also showed positive dynamics.

At the same time, Sberbank CIB analysts point out that construction volumes in September increased by only 0.1% compared to September 2016, and for the 9 months of 2017 decreased by 2% compared to the same period last year. Rosstat also significantly revised the dynamics in the construction sector in 2016 (the rate of decline was 2.2% against the previous 4.3%) and for January-June this year. According to new data, construction volumes in the first half of the year did not increase, but decreased by 3.4%.

In addition, there was a very sharp slowdown in annual growth in the transport sector: in September it was 2.9% against 7.9% in August. The average annual growth for the nine months was 6.8%.

Earlier Rosstat said that industrial production in January-September 2017 compared to the same period last year increased by 1.8%. In the third quarter, growth was 1.4%, in September, only 0.9%.

Not very optimistic is the fact that the main contribution to the growth of industrial production this year is the mining of minerals. For nine months, the performance of this sector increased by 2.8%, while manufacturing output increased by only 1%.

It should also be noted that for three quarters of this year, the Federal State Statistics Service recorded a decrease in real disposable income of the population (minus 1.2%).

“In general, the current statistics, along with very weak data on industrial production presented earlier, does not indicate a clear improvement in economic performance in the third quarter compared with the second quarter, which means that GDP growth could actually slow down,” analysts say .

It is also worth noting that the authorities point to an increase in investment in fixed assets as a growth factor. Over the first half of the year, they grew by 4.8%. But, as experts say, this is caused by one-time factors associated with large state-owned construction projects.

According to Natalia Orlova, the chief economist of Alfa Bank, the current growth in investments, including in the construction sector, is not supported by fundamental factors and may end anytime.

The expert explains the increase in investments in construction by implementing several large investment projects. In particular, this is the construction of a bridge across the Kerch Strait and the “Siberia Power” gas pipeline.

The same factors were mentioned by the Bank of Russia in the August issue of the information and analytical commentary “Economics: facts, assessments, comments”. In the II quarter of this year, “the volume of construction work has significantly increased,” the survey noted.

Support for this is supposed to be “provided by the implementation of major infrastructure projects, such as the construction of a bridge across the Kerch Strait and the Siberia-Siberia gas pipeline,” the Central Bank analysts wrote.

Thus, to say that Russia finally defeated the recession and entered the trajectory of sustainable growth is premature.


Original in Russian: Gazeta.ru

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