By Vestnik Kavkaza
On October 21 Russian Prime Minister Dmitry Medvedev at the Consultative Council on Foreign Investment in Russia said that Russia's GDP in 2013 in the best-case scenario will grow by 2 %. The government expects the 1.8 % GDP growth in 2013. The Economic Development Ministry believes that if the current tendencies in economic development prevail, the country's GDP in 2013 will be able to grow only by 1.5 to 1.6 %. During the meeting of the Advisory Board of Economic Development, Minister A. V. Ulyukayev said that Russia's GDP in January-September will increase by 1.5 % in annual terms, noting that there are not many positive tendencies at the moment.
Valery Mironov, deputy director of the "Center for Development" at the Higher School of Economics, said that “this year the economic growth rate reduction is down to 2%. Although at the beginning of this year everyone forecast more than 3%. We started talking about a slow-down a long time ago, but nevertheless it has even exceeded our expectations. Why? First of all, due to a subjective factor: a rapid decrease in investment activity, which is not recovering at all. The invested energy increases and in general one could expect that investments were to increase by 3.5% this year, just as the GDP last year, but as you know in these 8 months they have decreased by 1.5 to 2 % or even more, I can't remember now. Of course, one can say that it happened due to a decrease in profitability of 20%, which usually also influences investment market in Russia, as is thought in econometrics. But even a decrease in profitability of 20% explains a decrease in investments only by about 2 %.”
“Perhaps this is a reflection of constant changes in the leadership of the Ministry of Economic Development, which defines domestic economic policy and the trade war. In September a key event took place. The growth rate of the main engine in the previous months, which maintained positive tendencies in the Russian economy, the growth of retail turnover, increased and was close to zero. From year to year it has been growing by 3 % but taking into account the change in seasons, it is almost a negative tendency. One can talk about stagnation.”
According to Mironov, there is a tendency towards a continuation of the slowdown, there is a high level of capacity utilization, and the state is unlikely to stimulate economic growth by means of easing credit policies: “The new leadership is focusing, which is perhaps correct, on targeting inflation, while all the Western policies of targeting inflation provide that the Central Bank should persuade the economy and everyone that it is not going to issue money, that it is going to decrease inflation. It is considered useful to convince economic agents of the anti-inflation character of a Central Bank with even such measures as for example when the economy is moving into recession, the Central Bank is not doing anything and demonstrating its principles. It often produced good results and perhaps in our situation it will continue to maintain the leadership of the Central Bank from easing credit policies.”
“I myself support this trend, I am not sure that we have extra available capacities and I am not sure that if credit policies are eased we will have stable economic growth. It can happen if people work extra hours, but then again there will be a slowdown due to the decrease in production due to the increase in costs, overheating, due to the acceleration of inflation, and we do not need this. We need certain principles in economic policy,” Mironov concludes.
Vladimir Salnikov, Deputy Director of the Center for Macroeconomic Analysis and Short-Term Forecasting, recalled that “the economy has been stagnating for almost a year now. The reasons for this are related to the fact that the factors that used to improve the international environment, especially prices on oil and other commodities, stopped functioning, and new ones have not developed. The majority of the so-called optimists expected a growth in investments, but unfortunately this has not been yet the case, because in conditions of global uncertainty on the markets, especially on the international market, investors are afraid to invest, to realize projects, because tomorrow something could happen and the risks are high.
At the same time, according to Salnikov, “there are also investment barriers, which have not been eliminated yet - it is true that it is not easy to invest in Russia. Nevertheless, I would like to stress that there are different states of affairs in different sectors. We have growing, rather actively growing sectors, which are developing at the moment based on the principle of substitution import. First of all there is the chemical industry, as well as wood processing and the production of a number of non-consumer goods. There companies are finding room to grow, and first of all this is connected to investments in substitution import.”
Salnikov thinks that “the economy of Russia has great growth potential, because, in contrast to Western countries, we have low consumption standards and, if efficiency and development are increased, we can develop continuously. On the other hand, investors have to believe that there are not going to be any serious shocks and be more courageous in their actions.”
