Russia’s economy will grow less than previously forecast this year as the deteriorating global outlook weighs on demand and inflation hurts domestic consumers.
Gross domestic product will expand 3.3 percent in 2013, less than the 3.6 percent expansion forecast in the fall, the World Bank said in a report today. Output will begin to recover in 2014, with GDP advancing 3.6 percent, the lender said.
Russia, the world’s largest energy exporter, has limited prospects to bolster growth through traditional channels as oil prices hold near record highs, according to the report. Europe is facing a deepening recession, while consumer-price growth in Russia is curbing the household spending that accounts for about half the economy.
“The weak external environment, high inflation, flat oil prices and sluggish domestic demand are set to postpone a pickup in growth toward the second half of 2013,” the Washington-based bank said. “Nevertheless, modest growth and lower inflation are projected to reduce poverty further.”
The ruble weakened for a second day against the dollar, depreciating 0.3 percent to 30.5895 as of 11:06 a.m. in Moscow. The Micex Index of 50 stocks fell 1.3 percent to 1,484.35, heading for its lowest close since Dec. 28 after election results in Italy raised doubts over its fiscal stability.
The World Bank’s forecast is less than the Economy Ministry’s 3.6 percent projection. The European Commission last week said it predicted Russia will grow 3.7 percent this year and 3.9 percent in 2014.
Economists see Russian GDP expanding 3.3 percent this year before accelerating to 3.8 percent in 2014, according to a Bloomberg survey.
Russia’s economy contracted 0.3 percent in January from a month earlier when seasonal factors were taken into account, Deputy Economy Minister Andrei Klepach told reporters in Moscow yesterday. That was the first monthly decline since March 2012, he said.
A drop in the inflation rate in the first half of the year combined with record low employment and higher wages helped cut the number of people in poverty to a record low, the World Bank said.
Some 17.2 million people, or 12.1 percent of the population, were below the poverty line in the first nine months of last year, 3 million fewer than a year earlier. The poverty rate was 14.3 percent in the same period of 2011.
Still, policy makers will need to take further steps to reduce the budget’s dependence on revenue from oil and gas, the report said. Those receipts accounted for 50 percent of Russian revenue last year.
The central bank must also continue to maintain its focus on bringing down inflation to make economic growth more sustainable, the report said.
“Today’s moderate growth reflects Russia’s moderate potential growth rate, as indicated by low unemployment and high capacity utilization, along with a weak external environment,” the World Bank said.
Bank Rossii has resisted calls from the government to reduce borrowing costs, keeping its main rates unchanged since a quarter-point increase in September. Policy makers including First Deputy Chairman Alexey Ulyukayev have argued that output is near potential and that lowering rates while inflation remains above the 5 percent to 6 percent target range for this year would be “counter-productive.”
Russia will need to cut the state’s role in the economy, better the investment climate, confront demographic challenges including an aging population and improve governance by fighting corruption, the World Bank said.
To contact the reporter on this story: Scott Rose in Moscow at firstname.lastname@example.org
To contact the editor responsible for this story: Balazs Penz at email@example.com