The world Bank again lowered its forecast for Russian GDP growth to 1%

The world Bank again lowered its forecast for Russian GDP growth to 1%

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World Bank sees Russia’s GDP growth in 2020, 1.7% (0.1 PP lower than the previous forecast), which corresponds to the forecast of Ministry of economic development for the next year

Moscow-Live.ru

The growth of Russia’s GDP by the end of 2019 will be 1%, according to analysts of the world Bank. These findings are contained in the report of the international organization, which read RBC. This is the fourth downgrade of forecast of the world Bank on the Russian economy since the beginning of the year. In January, the growth expected at 1.5% in April, expectations fell to 1.4% in June to 1.2%.

The slowdown was caused by several factors, which are exacerbated by the continuing sanctions. So, low investment and weak growth in retail trade was influenced the slower-than-expected GDP growth in the beginning of the year. Retail sales growth slowed in connection with the increase of VAT from 18 to 20% and industrial activity declined in the first half of the year due to the agreement with OPEC to reduce oil production. In addition, the situation was negatively affected by the pollution of the pipeline «Friendship» through which supplying oil to Europe.

The report also noted that economic activity was negatively affected by a tightening of monetary policy earlier in the year, but then the Bank of Russia three times has lowered its key rate. It is now 7%. In General, the growth of the economy in 2020 should have a positive impact of further easing of fiscal and monetary policies, and planned infrastructure projects.

World Bank sees Russia’s GDP growth in 2020, 1.7% (0.1 PP lower than the previous forecast), which corresponds to the forecast of Ministry of economic development for the next year. However, the world Bank forecast for 2021 was unchanged at 1.8 percent, while the Ministry of economic development aimed at accelerating to 3.1%.

The situation with private investments in Russia, world Bank economists are still evaluating as «cool». The reason is the «policy uncertainty» and the prospects of a slowdown of potential growth with the increasing population pressure and accumulation of current structural problems such as lack of competition.

Weaker growth in Russia could potentially impact on the countries of Central and Eastern Europe and South Caucasus, which support her trade and financial linkages, the economic slowdown in Russia could lead to a reduction of remittances of workers, which accounted for an important part of the income of these countries, including in the Kyrgyz Republic, Moldova, Tajikistan and Ukraine.

As explained, the macro analyst of Raiffeisenbank Stanislav Murashov, the world Bank forecast assumes acceleration of the economy in the second half of 2019, including due to late budget spending and reduce the negative impact of VAT increase. According to Murashova, in the second half growth should be about 1.5%, and the total increase for the year — slightly more than 1%. Other experts note that the lowering of the forecast of the world Bank may be attributable primarily to poor external environment: the world economy is slowing, Russia has experienced a negative dynamics of exports of goods and services.

Affect the situation and weak domestic consumer and investment demand, however, the increase of budget expenditures in the second half would accelerate economic growth. So realistic as a world Bank forecast and forecast of economic development.

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