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Russia May Raise 2013 Growth Forecast On Bumper Harvest, Low Base -Officials
By Alexander Kolyandr
MOSCOW--Russia's government is likely to raise its forecast of 2.4% economic growth this year, after a string of downward revisions in recent months, as the country is expected to bring in a bumper grain harvest, among other factors, officials told Dow Jones Newswires this week.
The increase, which is expected to be announced by the economy ministry in September, would be a rare piece of good news for the Russian economy, which has stalled in recent months amid weak demand for the country's commodity exports, slowing investment and unrelenting capital flight.
"We can say that the weakest point for the economy has been passed already, and in the absence of negative surprises from the global markets, we can expect higher growth," Deputy Finance Minister Moiseev said in a phone interview, noting that he's not directly involved in making the official forecasts.
Other officials familiar with the plans, however, confirmed that an increase was being considered, but declined to be quoted by name, citing government policy. Russia's gross domestic product forecast for this year may be increased to as high as 2.7%, they said.
Russia's financial markets have taken a beating since the spring, like others in the developing world, largely because of concern that the U.S. Federal Reserve would begin tapering its bond-buying purchases, which undermined investor appetite for emerging market assets. However, Russia's authorities had started cutting their growth forecasts before the Fed's talk of tapering, as a lack progress with economic reforms and privatization had spurred capital flight.
However, some officials now say the slide in the ruble's value could provide a boost to domestic producers, while the latest cooling of China's economy hasn't yet had a major impact on prices for oil and gas, Russia's main exports. Also, concern about the Fed tapering its bond purchases has ebbed this week after its chairman, Ben Bernanke, made it clear the central bank was in no hurry to tighten monetary policy.
Economists and officials said the main factor driving the likely increase in Russia's GDP forecast was the relatively strong grain harvest expected this year. Last year's farm output was weaker than usual, hence this year's improved harvest is expected to boost growth.
In addition, the economic slowdown expected in the first half of this year--with a growth rate of about 2.0% forecast, the lowest since 2010--is partly the result of a tough comparison with the corresponding period in 2012, when election- season spending had boosted the economy.
That largesse tapered off in the second half of last year, meaning growth figures for the rest of 2013 are likely to be stronger than those seen in the first half, officials said. An expected easing of interest rates by the Bank of Russia also may help support growth later this year.
However, despite the likely upgrade for growth in the second half, economists and officials doesn't expect the expansion to accelerate much further, holding to a 2.5% to 3.2% range for the next several years as stagnant commodity production, reduced privatization and years of underinvestment hamper efforts to lift growth toward the Kremlin's 5% target. The official GDP growth forecast for next year remains 3.7%
Last month, the International Monetary Fund cut Russia's growth forecast for 2013 to 2.5% from 3.4%, and to 3.25% from 3.8% for 2014, citing weak investment, along with poor external demand.
The IMF recently praised Russia's tight fiscal and monetary policy, but called for more reforms to boost growth.
"Ambitious economic policy reforms are necessary to realize the Russian economy's medium-term potential and reduce its vulnerabilities," the fund said.
However, the Kremlin is expected to rely on increased state spending to boost growth, rather than adopt any bold economic reforms.
Write to Alexander Kolyandr at alexander.kolyandr@dowjones.com
Read more: Russia May Raise 2013 Growth Forecast On Bumper Harvest, Low Base -Officials
By Alexander Kolyandr
MOSCOW--Russia's government is likely to raise its forecast of 2.4% economic growth this year, after a string of downward revisions in recent months, as the country is expected to bring in a bumper grain harvest, among other factors, officials told Dow Jones Newswires this week.
The increase, which is expected to be announced by the economy ministry in September, would be a rare piece of good news for the Russian economy, which has stalled in recent months amid weak demand for the country's commodity exports, slowing investment and unrelenting capital flight.
"We can say that the weakest point for the economy has been passed already, and in the absence of negative surprises from the global markets, we can expect higher growth," Deputy Finance Minister Moiseev said in a phone interview, noting that he's not directly involved in making the official forecasts.
Other officials familiar with the plans, however, confirmed that an increase was being considered, but declined to be quoted by name, citing government policy. Russia's gross domestic product forecast for this year may be increased to as high as 2.7%, they said.
Russia's financial markets have taken a beating since the spring, like others in the developing world, largely because of concern that the U.S. Federal Reserve would begin tapering its bond-buying purchases, which undermined investor appetite for emerging market assets. However, Russia's authorities had started cutting their growth forecasts before the Fed's talk of tapering, as a lack progress with economic reforms and privatization had spurred capital flight.
However, some officials now say the slide in the ruble's value could provide a boost to domestic producers, while the latest cooling of China's economy hasn't yet had a major impact on prices for oil and gas, Russia's main exports. Also, concern about the Fed tapering its bond purchases has ebbed this week after its chairman, Ben Bernanke, made it clear the central bank was in no hurry to tighten monetary policy.
Economists and officials said the main factor driving the likely increase in Russia's GDP forecast was the relatively strong grain harvest expected this year. Last year's farm output was weaker than usual, hence this year's improved harvest is expected to boost growth.
In addition, the economic slowdown expected in the first half of this year--with a growth rate of about 2.0% forecast, the lowest since 2010--is partly the result of a tough comparison with the corresponding period in 2012, when election- season spending had boosted the economy.
That largesse tapered off in the second half of last year, meaning growth figures for the rest of 2013 are likely to be stronger than those seen in the first half, officials said. An expected easing of interest rates by the Bank of Russia also may help support growth later this year.
However, despite the likely upgrade for growth in the second half, economists and officials doesn't expect the expansion to accelerate much further, holding to a 2.5% to 3.2% range for the next several years as stagnant commodity production, reduced privatization and years of underinvestment hamper efforts to lift growth toward the Kremlin's 5% target. The official GDP growth forecast for next year remains 3.7%
Last month, the International Monetary Fund cut Russia's growth forecast for 2013 to 2.5% from 3.4%, and to 3.25% from 3.8% for 2014, citing weak investment, along with poor external demand.
The IMF recently praised Russia's tight fiscal and monetary policy, but called for more reforms to boost growth.
"Ambitious economic policy reforms are necessary to realize the Russian economy's medium-term potential and reduce its vulnerabilities," the fund said.
However, the Kremlin is expected to rely on increased state spending to boost growth, rather than adopt any bold economic reforms.
Write to Alexander Kolyandr at alexander.kolyandr@dowjones.com
Read more: Russia May Raise 2013 Growth Forecast On Bumper Harvest, Low Base -Officials
