The Forecast of the Ministry of Economic Development Appears Again Difficult to Achieve
On the other day, Alexei Ulyukaev, Minister of Economic Development made public the outputs of calculations of the Ministry of Economic Development. According to the above outputs, with taking into account the current economic situation, particularly, the expected capital outflow of $60bn in the 1st quarter of 2014 (which is comparable to the capital outflow in 2013), in 2014 the economic growth rates in Russia will amount to 1.8%–1.9% as compared to the previous year.
In addition to the above, the Ministry of Economic Development calculated that in case of a more pessimistic scenario of developments (capital outflow of $100bn in 2014) growth may amount to the mere 0.6%. It is to be noted that in the beginning of the year, the Ministry of Economic Development expected GDP growth of 2%-2.5%.
In our view, the statement made by Alexei Ulyukayev yesterday was prompted by negative trends which were observed in the Russian economy (a drop in output, investments and households' real income, large-scale capital flight and other), as well as expectations of worsening of the situation due to the international reaction to the Crimea crisis and possible economic sanctions against Russia. It is to be reminded that on the other day the World Bank made public the main theses of its Report on the Russian Economy in which it was stated that in case of a more pessimistic scenario the capital flight from Russia in 2014 would amount to $150bn.
According to the preliminary calculations of the Structural Research Center of the Gaidar Institute, only in the 1st quarter the capital outflow will amount to $75bn. So, the capital outflow of $100bn is a fairly optimistic forecast, rather than a pessimistic one as the Ministry of Economic Development forecasts. Calculations of the World Bank appear to be more close to reality.
In our view, actual downward revision by the Ministry of Economic Development of the economic growth rates forecast is quite predictable: the Russian economy has exhausted the sources of its growth, oil prices do not make such a large contribution to GDP growth as they used to do in the 2000-2007 period, while new growth factors and prerequisites do not exist so far. It is to be noted that such a lamentable state of things is aggravated by political developments related to the Crimean crisis. It is to be hoped that the present geopolitical situation will return to normal in the near future and its effect on the Russian economy will not be a far-reaching one.
Мaria Kazakova, PhD (Economics), Head of the International Department of the Budget Stability Research