Yevgeny Nadorshin: "Russia GDP growth rate of 1.5% in 2018 is optimistic scenario"

They year of 2017 is coming to an end, and, by tradition, Vestnik Kavkaza summarizes the results of the outgoing year. Your attention is invited to a conversation with the chief economist at PF Capital, Yevgeny Nadorshin about the changes in the Russian economy during this time and its current state.

- Evgeny Ravhatovich, by your estimation, what did 2017 bring for the Russian economy?

- I think this year there was very ambiguous dynamics. At first everything seemed to be better than I expected - the development of the rouble exchange rate, GDP and other indicators, the forecasts and expectations on which were revised upward by me and other experts. Unfortunately, the second half of the year was rather marked by a stable deterioration, as a result of which it is expected that some of the indicators will be worse and significantly worse than the forecasts revised in the summer of 2017, when the final statistics will be published.

This ambiguity within the year is still difficult to explain, a growing number of negative signals can be seen not only in the statistics of industrial production, but also in the dynamics of bankruptcies, bank lending, investments and a number of additional indicators that often not considered as basic when it comes to economic development, but they well indicate possible prospects. And then I see that a decent part of such indicators indicate a continuing and possibly increasing deterioration of the economic situation, up to the point that if GDP were considered by months, we would have negative growth rates in November.

- Does this mean that it is too early to expect the Russian economy to grow in the coming year?

- Negative indicators, of course, raise questions about whether the recession may return next year, at least they substantially increase such a probability. Of course, the recession is not a basic scenario, but due to the trend towards a consistent deterioration of indicators throughout most of the second half of 2017, according to a comprehensive set of indicators, it is becoming increasingly real. Only consumption is growing mow, just like before the recession has started about 3 years ago, but not in all segments, in some cases I am ready to recognize it only with reservations. I cannot be completely sure that all that I see as an improving dynamic in retail trade is real growth, and not a whitewashing of the informal economy because of the Federal Tax Service's efforts to increase the collection of taxes, which Rosstat categorizes as growth. And this is also quite an important indicator that, perhaps, retail growth, even more or less stable in a number of segments, is not as good as it looks in statistics.

Collectively, doubts regarding statistical reporting of real processes in the economy, a consistent decline in dynamics of a number of indicators and the November failure greatly worsen the feeling of 2017, forcing us to make a more mixed assessment about its results. Now it became clear that we were witnessing a not really explicable burst of activity in the second quarter of 2017, followed by a weak second half of the year, which does not fit into expectations at all. It makes us look in the perspective of 2018 with much less optimism, and, while I'm still waiting for growth, the recession is again becoming a rather likely scenario for next year, and if we see more stringent US sanctions in early 2018, it may become a basic scenario. And since I am inclined to believe that sanctions against us will be tightened, the question is just how much, it makes me very uncomfortable.

- Nevertheless, what will ensure the Russian economic growth next year?

- If I adequately understand the situation, the main Russian economic growth will again be based on the dynamics of final consumption, as it was between 2010 and 2015. The resource of growth due to this source is very limited. In view of the slow wage growth and spending of Russians, consumption can ensure economic growth for one or two years, if there are no external negative shocks. I'm afraid, we cannot expect a longer-term perspective. That is, the expectations are quite alarming, I am concerned by the outlines which are seen already in the near future and, worse still, I do not see really optimistic scenarios. In my view, it would be good if next year we get a growth rate of at least 1.5%, it would be pretty optimistic.