Rosstat’s new data as disincentive for government officials
The Ministry of Economic Development of Russia has unsurprisingly changed its official economic growth projection for Russia in 2014. For example, the projected baseline scenario shows that GDP in 2014 is going to grow at a rate of 1.1% rather than 2.5% comparing to the previous year.
Furthermore, the Ministry of Economic Development has downgraded from 4.8% to 6% its forecast for inflation, as well as from $25bn to $100bn for capital outflow. Furthermore, the ruble exchange rate is expected to drop to Rb 36,3 per US dollar while crude oil price increase to $104 per barrel. Note that the conservative-adaptive scenario of the Ministry of Economic Development shows only a 0.5% growth in GDP in 2014.
In our opinion, it was predictable that the Ministry of Economic Development of Russia might downgrade its forecast for economic growth rates in 2014 amid adverse trends in the economy. Furthermore, a more conservative forecast for growth in GDP and capital outflow from the Russian Federation may just as well be realized given potentially serious implications of economic sanctions against Russia and, therefore, further worsening of investment climate. It should be noted that worsening foreign policy situation also resulted in that IMF downgraded (from 2% in January 2014 to 1.3%) its forecast for GDP growth rate in Russia in 2014 almost at the same time when the Ministry of Economic Development did the same. Additionally, the diagram shows that it isn’t the first time when the Russian GDP growth rate forecast for 2014 has been downgraded.
Fig. 1. Dynamics of IMF’s economic growth projections for Russia in 2014, year on year.
Data source: IMF (http://www.imf.org).
The 2013 results, as revised by Rosstat, showing accelerated economic growth since Q2 2013, seem to be not quite plausible amid not very optimistic projection of economic growth in Russia in 2014. There are even more concerns over the fact that the Rosstat’s new data discourages the official government authorities from taking serious measures towards improving the quality of institutions, making structural economic reforms, and coping with the resource curse, as well as strengthening social services and human capital as crucial factor of economic growth. And this means that Russia is lagging further behind the developed economies and lacks, in the foreseeable future, any prerequisites for taking a new stationary growth path.
Maria Kazakova, Ph.D. in Economics, Head of Economic Development Department, Deputy Head of International Center for Budget Sustainability Study