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Russia’s 0.5% GDP growth realistic goal for 2014 — deputy minister

October 27, 2014, 19:41 UTC+3
Considering the high base effect in the fourth quarter of 2013, the projected 0.5% growth is a realistic goal, believes Deputy Economic Development Minister Alexey Vedev
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© ITAR-TASS/ Zurab Dzhavakhadze

MOSCOW, October 27. /TASS/. Russia’s 0.5% GDP growth is a realistic goal for 2014, Deputy Economic Development Minister Alexey Vedev said on Monday.

Given an optimistic scenario, Russia’s GDP growth may even be larger in 2014, the deputy economy minister said.

“The third quarter results are fairly good. GDP grew by 0.7% in the third quarter and by 0.8% during the three quarters. Considering the high base effect in the fourth quarter of 2013, we believe the projected 0.5% growth is a realistic goal,” the deputy economy minister said.

He also said the slower growth in household real disposable money income, the contraction of investment amid uncertainty and the ruble’s devaluation were the negative trends affecting the country’s GDP growth.

Director of the ministry’s macroeconomic forecasting department Oleg Zasov said risks existed that agriculture could make a negative contribution to Russia’s economic indicators because of cold October.

IMF, World Bank forecasts on Russia’s GDP growth

The International Monetary Fund (IMF) said in early October it had left unchanged its forecast on Russia’s GDP in 2014 at 0.2% amid persisting geopolitical tensions.

The IMF expects Russia’s capital outflow to hit $100 billion in 2014 and slightly drop in 2015 but will still remain high.

Meanwhile, the World Bank lowered in late September its outlook for Russia’s GDP growth to 0.5% in 2014 from the previous forecast of 1.1%, which was based on the assumption that geopolitical tensions would subside.

The World Bank’s updated outlook predicted low rates of Russia’s GDP growth at 0.3% in 2015 and 0.4% in 2016.

The World Bank said that a return to higher growth in Russia would depend on private investment growth and an increase in consumer sentiment.

The World Bank’s baseline scenario for Russia excludes a further escalation of geopolitical tensions or additional sanctions.

Russia’s inflation forecast

Russia’s Economic Development Ministry sees serious risks that inflation in 2014 will exceed the official forecast of 7.5% amid the rapidly depreciating ruble.

“We have a 7.5% forecast for the current year. The forecast will be revised by December 1. There can be very diverse expectations but we estimate there are high risks that the inflation forecast will be exceeded, first of all, because the ruble is depreciating faster than we expected,” the deputy economy minister said.

Director of the ministry’s macroeconomic forecasting department Oleg Zasov said risks also existed that the 2015 tariff adjustment might be revised due to higher-than-expected inflation.

Russia’s Economic Development Ministry said it expected capital outflow at less than $20 billion in the fourth quarter of 2014 and would not revise its $100 billion capital flight forecast for this year until December.

“We are now making some preliminary calculations. But our forecast remains the same so far,” Vedev said.

In turn, department head Zasov said capital outflow had slowed down considerably in recent months. He said, however, he expected capital outflow to intensify as households would continue converting rubles into foreign exchange.

Later, Russian Minister of Economic Development Alexey Ulyukayev said in an interview with the Rossiiskaya Gazeta daily to be published on Tuesday that Inflation in 2015 in Russia will reach its maximum in the first quarter of the year to subside later in the year.

“The maximum levels of inflation are expected in the first quarter of 2015 when we will feel impacts from the ruble exchange rate fluctuations. The peak is expected in February and March. After that, it will subside to be less than 7% by December 2015,” he said.

However, he said that the year’s mean inflation rates were likely to exceed 7%.

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