Principal Conditions for Russian Economic Growth Greatly Increases

In 2018 and 2019, the Russian economy could grow by 3-3.5 percent a year providing a reasonable increase in investments, according to Jacques Sapir, a French economist and specialist in Russian and CIS studies. On Thursday, Sapir participated in a briefing organized by the Association of European Business.

Sapir noted that since the end of 2016 the Russian economy has been showing a slow upswing but in the near future the situation will probably improve.

"Economists have a consensus forecast that in 2017 Russian GDP will increase by 1.5-2 percent."

According to estimates by the Economic Development Ministry, this year Russia will see a 0.6-percent increase in GDP with oil prices staying at $40 a barrel and 1.1 percent growth if oil is $48 a barrel.

"Any further forecasts are more difficult to make because there are two scenarios. If investments stay the same or insignificantly increase in 2018-2019 Russia’s GDP could show 1.2-1.5-percent growth. If investments rise at a faster pace GDP growth could reach 3 percent or even 3.5 percent," Sapir said.

According to the economist, those numbers look even more solid amid the overall situation in the global economy.

"GDP growth in Germany is 1-1.5 percent, and in the United States nearly two percent. We can assume that [US President Donald] Trump’s economic policy will drive it to 2.5 percent. But in comparison to Russia, such rates are pretty low," Sapir pointed out.

However, the situation could deteriorate if the Russian Central Bank tries to reach four-percent inflation.

"The central bank’s target is four percent. I don’t understand where it comes from. Why not three or five percent? I think that each economy has its natural inflation rate below which there is stagnation. As I see Russia is now close it its natural inflation rate, maybe it is five-six percent. But government’s push to reach four percent may lead to stagnation," the expert explained.

Sapir also shared his thoughts on the ruble exchange rate, assuming that a partial removal of US sanctions against Russia will contribute to the ruble strengthening.

"If Trump lifts part of the sanctions related to the financial sector the ruble could rise to 58-57/$1 by end of the year and even to 55-52/$1, according to different estimates," he concluded.

 

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