Russian Economy Slows to Weakest Growth Since 2009 SlumpScott Rose and Olga Tanas
Russia’s economy grew at the weakest pace in the fourth quarter since a recession in 2009 as Europe’s debt crisis prompted companies to cut investment and the government curbed a year-end spending splurge.
Gross domestic product rose 2.1 percent from a year earlier, slowing from an upwardly revised 3 percent in the third quarter, the Federal Statistics Service in Moscow said in an e-mailed statement today. That matched the median estimate of 18 analysts in a Bloomberg survey.
Slumping consumer spending, which accounts for just under half of GDP, is putting the breaks on wholesale and retail trade, the data showed. The mainstay of the expansion is faltering as a recession in the European Union, which accounts for about 50 percent of Russian trade, chokes corporate investment and curbs demand for commodities.
“Our economic growth of less than 3 percent is stagnation, putting us behind the global economy,” former Finance Minister Alexei Kudrin said at a conference in Moscow today. “We’ll have to fight for 3 percent. And every month so far this year has edged us toward cutting the growth forecast.”
The statistics service reiterated its first estimate of economic growth at 3.4 percent for 2012, down from 4.3 percent in 2011 and 4.5 percent in 2010. Second-quarter growth was revised up to 4.3 percent and the January-March period was cut to 4.8 percent, according to the statement.
The Micex Index of 50-stocks advanced 1.1 percent in the final quarter of last year, lagging behind a 5.2 percent gain in the MSCI Emerging Markets Index. The Russian benchmark fluctuated between gains and losses, and was 0.1 percent higher at 1,429.71 as of 6:22 p.m. in Moscow.
Gross fixed-capital formation grew 1.4 percent in the fourth quarter from a year earlier, slowing from a 4.7 percent pace in the previous three months, according to the statement. Exports advanced 1.4 percent while imports grew 9.2 percent. Government consumption contracted for a third straight quarter, dropping 0.8 percent from a year earlier.
Steelmakers including Novolipetsk Steel and OAO Severstal reported net losses in the fourth quarter. Billionaire Alexey Mordashov, Severstal’s chief executive, cited a weakening global economy as a drag on demand.
The economic deceleration, which has continued into this year, sparked an argument between policy makers over interest-rate cuts to spur growth with inflation above target. The central bank today left its main rates unchanged while cutting some borrowing costs on less frequently used credit instruments and signaling greater concern about the slowing economy.
The economy has “virtually no chance” to expand faster than the government’s official 3.6 percent forecast for this year and risks persist that it will grow more slowly, Deputy Finance Minister Alexei Moiseev said at a conference organized by the Vedomosti newspaper March 29.
The Economy Ministry may revise the growth forecast, Deputy Economy Minister Andrei Klepach said at the same conference, declining to elaborate. Russia would grow less than 2 percent in 2013 if output continued to expand at the current pace, he said.
Growing at the 5 percent medium-term target set by Prime Minister Dmitry Medvedev isn’t in the cards for this year, and probably won’t happen in the coming years without a significant improvement in the external environment, according to Klepach.
Agricultural output declined 9.5 percent in the fourth quarter from a year earlier, the data showed. Mining and quarry advanced just 0.2 percent, from 1.5 percent in the third quarter. Wholesale and retail trade grew 1.3 percent in the period, down from 7.8 percent in the prior three months.