Morgan Stanley: weak investment main cause of Russian slowdown

By Andrei Skvarsky.

Morgan Stanley believes poor investment is the main cause of Russia’s decelerating economic growth.


Weak investment has been more powerful as a growth decelerator than robust global oil prices have been as an accelerator, the bulge bracket bank’s chief economist for Russia, Jacob Nell, argued at a briefing in Moscow last week.

But Morgan Stanley expects some increase in investment next year, though 2013 has shown a string of “disappointments”, making the Wall Street firm revise its growth forecast for the year to 1.6% from 2.2%, Nell said.

Hence the Russian economy will pick up somewhat in 2014, the bank thinks, though it has still downgraded its growth forecast for that year to 2.7% from 3.1%.

One hindrance to growth in Russia is the government’s foot-dragging on structural reforms, according to Morgan Stanley. Another is the apparently increasing role of the state in the economy, one example being the large-scale acquisition of private energy companies by state-owned firms, the firm argues.

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