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Russian economy stalls

September 19, 2013, 11:49 UTC+3

Slowdown of economic growth became evident back in 2012, but government has begun taking measures only now

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The Russian economy finds itself in a most severe crisis for the first time since 2008. Russian Minister for Economic Development Alexei Ulyukayev said about it on Wednesday, Novye Izvestia daily writes. The minister said the pace of GDP growth in 2013 of 1.8 percent was extremely unsatisfactory.

According to Ulyukayev, slowdown in the rate of growth began at the end of last year, while in the first six months of this year Russia’ GDP grew only 1.4 percent, while industry demonstrated a zero growth. There was no growth in investment either. “Nevertheless we believe that the situation in the third and fourth quarters of the year will improve a bit, and the results will be better than in the first and second quarters. And at year-end we will have a 1.8 percent growth of GDP. Which is not satisfactory either, of course,” the minister admitted.

“Downward dynamics of fixed investment, which declined 0.7 percent in the first half of the year also makes the situation worse. Deputy Minister for Economic Development Andrei Klepach reported there was a 1.3-percent decline in investment in the first half of the year,” Moskovsky Komsomolets daily writes.

This year the ministry expects an outflow of capital from Russia at 70 to 75 billion dollars, which is much higher than last year’s 56 billion dollars. This means this year almost 1.5 times more currency will “flee”.

The Russian authorities have acknowledged that the country’s economy has been stalling for more than a year, Nezavisimaya Gazeta daily writes. In all appearances, Russia will retain the position of a lagging country, whose economy is developing slower than the worldwide average.

In all appearances, the next year will not be better. “This year we for the first time have the level of economic development lower than worldwide average. This is a very serious red signal. And unfortunately we don’t see an opportunity to get to the worldwide average level even in 2014,” Finmarket news agency quotes Ulyukayev as saying.

The minister refers to “a quite unfavorable situation”. One may get an impression that the minister is speaking about the whims of nature beyond his control and not about the sphere of his direct responsibility - an economic growth that his ministry must encourage in every possible way.

Does the government understand the reason behind these developments? - Nezevisimaya Gazeta asks. Do the ministers know why the situation in the Russian economy is now the worst since 2008? Failing to diagnose the malady of the Russian economy, the Russian authorities have once again pointed to external factors such as “low global market trends and European recession” which have immediately resulted in “a decline in physical amounts of our exports” and a negative price trend.

The slowdown of the pace of Russian economic growth became evident back at the end of 2012, but the government has begun taking measures only now, analyst from Finam Investment Holding Anton Soroko notes. According to him, the main problem is that factors ensuring the growth of GDP for the past five years have gradually reduced to zero - oil prices, inflow of foreign capital, consumer crediting, a growth of domestic aggregate demand. And no new factors have emerged, Nezavisimaya Gazeta notes.

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