Russian economy fails to expand at Putin’s rate

6643ssian economy fails to expand at putin  s rate Russian economy fails to expand at Putin’s rate

The course of economic reforms is not being fulfilled accordingto President’s plans, Morgan Stanley agency reported after havingrevised Russia economic forecast a year on since Vladimir Putinreturned as head of state in March 2012.The agency looked at 12 spheres and only four of them wereranked as “good”, while six got “satisfactory” and two got “bad”marks. Macroeconomic policy is marked among the best, with suchimportant achievements as approval of budget rules and the CentralBank’s struggle to get a grip on inflation. But pension reform andtariff policy are dragging far behind and were ranked as the worstby the bank.However the International Monetary Fund has a more optimisticperspective for the Russian economy. Speaking in February, Odd PerBrekk, Senior Resident Representative of the IMF in Russia, saidmid-term 6% growth was possible if investment in production wasboosted. But the IMF forecast for Russia’s GDP was still moregrounded. “We expect the Russian economy to grow in line with itspotential, at a moderate rate of 3.75%. The uncertainties in theglobal economic outlook translate into uncertainties also for theoutlook for Russia, with the risks predominantly on the downside.At the same time, core inflation remains high and, on currentpolicies, headline inflation is projected to stay above the Bank ofRussia’s forward-looking target path, aimed towards 4-5% inflationby end-2014,” Odd Per Brekk said.At the same time, the currently low unemployment and highcapacity utilization rates suggest that economic activity was closeto, if not above, its potential, Mr Brekk added.“Indeed, recent IMF research concludes that Russia’s “growthmodel” of the last decade―which produced a decent 5-5.5% averageannual growth―may have run its course. This is because past growthwas due mostly to increased capacity utilization and someimprovements in efficiency, rather than investment in new andproductive capacity, and also was boosted by rising oil prices. Alltold, the Russian economy is now pushing up against its capacityconstraints,” he said.The Russian economy has a growth potential of 3.5-4% per year,but this requires structural change, Russia’s G20 Sherpa and headof the presidential administration expert, Ksenia Yudaeva earliertold RT. In particular, improving the investment climate andrelatively favorable growth rates in the EU, US and China arenecessary to preserve this rate, she said.

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Russian economy fails to expand at Putin’s rate


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