Russia Forecasts Losing Ground in Global Economy by 2030Stepan Kravchenko and Scott Rose
Russia’s share of the world economy will probably shrink during the next 20 years as growth trails the global average, Economy Minister Alexei Ulyukayev said.
Gross domestic product will rise at an average pace of 2.5 percent through 2030, less than the 3.4 percent to 3.5 percent global rate, according to the ministry’s updated forecasts. That would reduce Russia’s share of world economic output to 3.4 percent by 2030 from 4 percent last year, the ministry said.
The muted outlook highlights the turnaround in fortune for the world’s biggest energy exporter, whose $2 trillion economy grew at an average annual rate of 7 percent during Vladimir Putin’s presidency from 2000 to 2008 before contracting 7.8 percent in 2009 after crude oil prices plunged. GDP growth decelerated every quarter since Putin won a third Kremlin term in March 2012, with senior officials including Prime Minister Dmitry Medvedev warning Russia’s export-driven economic model neared exhaustion.
“The upshot is that without a major shift in policy we suspect that Russia will go from being one of the world’s fastest-growing economies to one of its biggest underperformers,” Neil Shearing, chief economist for emerging markets at Capital Economics Ltd. in London, said by e-mail. “Today’s forecast revisions suggest a grudging acceptance of this new reality among policy makers in Moscow.”
Russia, the world’s ninth-largest economy in dollar terms last year according to the World Bank, rode near-record oil prices to average an expansion of about 4 percent in 2010-2012 before growth stumbled this year.
Putin, whose time in power will match Soviet leader Leonid Brezhnev’s 18-year rule at the end of his current term in 2018, faces similar risks of stagnation that marked the decline of the Soviet Union.
Soviet nominal GDP reached $993 billion in 1983, the year after Brezhnev’s death, according to data compiled by the United Nations. That’s about 8.7 percent of global output at the time, according to World Bank data compiled by Bloomberg. The Soviet share fell to 3.5 percent in 1990, the data show.
The Russian republic declared sovereignty from the Soviet Union in June 1990, the first of the Soviet states after the Baltics to do so. Ukraine, Belarus and Moldova followed, bringing about the dissolution of a federation of almost 300 million inhabitants in 1991.
“The revisions made to the baseline scenario of Russia’s long-term economic growth make it more realistic,” Alexander Morozov, Moscow-based chief economist at HSBC Holdings Plc for Russia, the Commonwealth of Independent States and Baltic countries, said by e-mail. “This scenario highlights the need for large-scale and broad improvements in business conditions and the investment climate in Russia, without which Russia will be losing its importance in the global economy and trade over time.”
With the economic growth forecast at no more than 2.5 percent in the next three to four years, bank lending and assets will grow 10 percent to 15 percent, central bank First Deputy Chairman Alexei Simanovsky told reporters in Moscow today.
Loans to households grew 39 percent on an annual basis in 2012, while the financial industry’s assets advanced 19 percent, central bank data show.
Putin’s government is struggling to stem the worst economic slowdown since a 2009 recession. The central bank, where Ulyukayev served previously as first deputy chairman, has been reluctant to reduce interest rates because consumer-price growth has held above its target this year.
“We expect Russian growth over the forecast period to lag behind the global average,” Ulyukayev said.
Russian stocks are underperforming global peers. The dollar-denominated RTS Index of 50 stocks has fallen 3.9 percent this year, compared with a 20 percent advance for the MSCI World Index of developed countries, according to data compiled by Bloomberg.
The ministry has drawn up three scenarios for economic growth during the next two decades and will use the conservative one as its base case. It envisions measures to modernize Russia’s energy and natural resources industries, and predicts average growth of 3.1 percent through 2020, dropping to 2.5 percent until 2025 and 1.8 percent to 2030.
The main outlook was previously based on a moderately optimistic scenario, with growth averaging 4.3 percent a year, according to the Vedomosti newspaper, which reported the forecast earlier today. The gloomier forecast was motivated primarily on domestic factors, with global economic projections largely unchanged, it reported.
GDP is estimated to rise 1.9 percent this year before accelerating to an average pace of 2.8 percent in 2014, according to the median estimate of 38 economists in a Bloomberg survey conducted last month.
The economy probably expanded 1.2 percent from a year earlier in the third quarter, the same pace as in the previous three months, Deputy Economy Minister Andrey Klepach told reporters in Moscow on Oct. 25. Growth has decelerated every quarter since the final three months of 2011, when output expanded 5.1 percent.