No major impact of import substitution on Russia’s economic growth so far — World Bank

09.11.2016

GDP growth is projected at 1.5% in 2017, 1.7% in 2018.

The Russian economy is expected to pass the crisis peak in the second half of 2016 and to recover starting 2017, says the World Bank report. GDP growth is projected at 1.5% in 2017, 1.7% in 2018. The World Bank has also upgraded Russia’s GDP outlook for 2016 to minus 0.6% from minus 1.2%. According to the report, consumption spurred by wage rise will again become the key economic driver in Russia in 2017-2018.

According to the report, the resumption of Russian federal budget planning practices for the three-year period will reduce the uncertainty of the economic policy and improve investor climate.

"Bolstering investor sentiment towards Russia by reducing policy uncertainty will help. One important step forward, particularly in light of eroding fiscal buffers with the Reserve Fund expected to be depleted in 2017, is a return of the medium-term fiscal framework," the report said.

Consumer inflation will slow down further on and slip below 6% by the end of this year.

"Consumer price inflation is expected to continue moderating, falling below 6% y-o-y by the end of 2016 (averaging at about 7.1%) and reaching 4% by the end of 2017. As a result, lower inflation, combined with improved credit conditions and a somewhat stronger ruble, will help increase households’ purchasing power and consumption growth will recover to 2.0% and 1.6% in 2017 and 2018, respectively," the report said.

As for the average crude price, it is expected tol stand at $43 per barrel in 2016, $55 per barrel in 2017.

The World Bank sees no major impact of import substitution on Russia’s economic growth so far.

Apurva Sanghi, World bank's lead economist for Russia, suggests that Russia should raise the retirement age in the mid-term.

The World Bank also said that Russia’s fiscal policy allowed for better retribution of revenues among population than in the US but less than in the EU.

"Russia’s fiscal policy is more redistributive than the United States’ but less so than the EU’s. Since the crisis in 2009, fiscal transfers-mostly due to increases in pensions-have played a much more critical role than rising labor incomes in sustaining income growth for households," the report said.


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