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Russia’s GDP may grow below 2% in 2017

Staff Writer | September 8, 2017
Russia’s economy may not expand 2% in 2017 despite expectations of a bumper crop, Andrei Klepach, a deputy CEO and chief economist at state development bank Vnesheconombank (VEB), said in a business conference.
Andrei Klepach
Russia   Andrei Klepach:
Previously, the Economic Development Ministry improved its 2017 GDP forecast to 2.1% from 2%. “We think that the situation will be more difficult, and we are unlikely to reach growth of 2% this year, though it is possible,” Klepach said.

“In the second half of the year, (growth) will be smaller, at about 1.4–1.5%. The results may be slightly higher due to two aspects -- agriculture is the first as we had a record harvest,” he said, adding that higher investment is the second aspect that revitalized the economy.

Still, investment is mostly done in energy and will decrease slightly due to Russia’s participation in an oil output reduction deal of OPEC and non-OPEC states. Investment is also connected to construction in Crimea and preparations for the FIFA 2018 World Cup, which are temporary, he said, adding that he doubts that Russian industrial output will grow 1.5% in 2017.

Russia should stimulate households’ real disposable incomes and state investment, which may help GDP grow about 3% a year, he said.

Klepach said that the Economic Development Ministry improved its 2018 forecast for households’ real disposable income growth to 2.1% from 1.5%, and retail trade turnover to 2.9% from 2.6%.

But these expectations are too high and ungrounded, he said. A 4% state employees wage indexation will only compensate price growth meaning that real disposable incomes will grow slower than expected and the retail trade turnover will only rise 1.6%, he said.