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Russian 2012 Economic-Growth Forecast Cut to 2.5% by Citigroup

Russia’s economy will expand 2.5 percent in 2012, Citigroup Inc. estimated, lowering its forecast for the second time this year amid concern a global slowdown and domestic politics will dent consumer confidence and investment.

The bank in August cut to 3.5 percent its earlier prediction of 4 percent growth, Citigroup economists Elina Ribakova and Natalia Novikova said in an e-mailed note today from London.

“Global financial turbulence and political uncertainty will weigh on investment and consumer expectations in Russia,” they wrote. “We hope this will be the end of the revisions, but the global outlook remains uncertain.”

Russia’s growth prospects are worsening as concern the U.S. is poised for a new recession and the lack of a solution to Europe’s debt crisis have roiled financial markets across the globe, prompting investors to reduce holdings of riskier emerging-market assets.

The decision by Prime Minister Vladimir Putin and President Dmitry Medvedev to swap jobs after parliamentary elections in December and a presidential ballot early next year indicates limited appetite on the part of Russia’s political elite for structural changes, Ribakova and Novikova wrote.

The economy will grow 4 percent this year as pre-election spending spurs consumer demand, according to Citi. Inflation will average 8 percent this year and about 7 percent in 2012, Citi forecast.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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