Five years of economic growth in Russia

"Regardless of government officials' statements about impending recession, the Russian economy has a chance to show decent results at year-end. BofA Merrill Lynch analysts expect GDP to grow 3.3% and inflation stay at 5% in 2013. A good harvest may prevent economic recession".

Indeed, the Ministry of Agriculture of Russia expects 2013 grain harvest to be 25-30% higher against the preceding year, which may have a downward effect on inflation and gain up to 1 p.p. for GDP growth rates, according to analysts of BofA Merrill Lynch. According to BofA Merrill Lynch, this can reduce the likelihood of a recession which the Ministry of Economic Development and Trade forecasted for the Russian economy in the fall.

 In our opinion, however, a positive effect of good harvest on 2013 results may have nothing more than a short-term effect, because, as repeatedly noted above, it takes much more time to perform structural reforms aimed at reducing dependence on raw materials, improving labor productivity, and eventually boosting growth rates which can keep stable in the long-term period. The concern of the Ministry of Economic Development and Trade about perspectives of economic growth in Russia is quite reasonable to this end.

 In our opinion, however, given the current situation with institutions and investment attractiveness of the Russian economy, it would be very hard within five years to complete serious structural reforms which the Ministry of Economic Development and Trade refers to .

Kazakova M.V. - Ph.D. in Economics, Head of Economic Development Department