Russia Warns of Investment ‘Achilles Heel’ as Growth Weakens

Russian economic growth slowed to a new low since the country climbed out of a downturn in 2010, Deputy Economy Minister Andrei Klepach said, warning that investment is the “Achilles heel” of the economy.

Gross domestic product expanded 2.2 percent in the fourth quarter from a year earlier, Klepach said, citing preliminary data, down from 2.9 percent in the third quarter and 4 percent three months earlier. GDP is forecast to grow about 3.5 percent over the full-year, he said.

“Our growth potential is higher and we could increase it, including through investment,” Klepach told journalists in Moscow today. “Investment remains the Achilles heel of our economy.”

Russian investment unexpectedly contracted in December from a year earlier, dropping for the second time in four months, as the dimming economic outlook prompted businesses to cut back spending.

Less spending is compounding the effects of weak external demand in choking the economy of the world’s largest energy exporter. Real wages grew at the slowest pace in more than three years, suggesting the consumer spending that accounts for about half of Russian gross domestic output may be stumbling.

To contact the reporter on this story: Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editor responsible for this story: Henry Meyer at hmeyer4@bloomberg.net

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