Moscow’s Renaissance Capital investment bank argues, citing preliminary statistics from the Russian Economics Ministry, that Russia’s economy has practically stopped growing and is in danger of recession.
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Declining prices for commodities such as aluminium, tin, crude oil and copper and output contraction in key industries such as mining, pulp and paper, and electrical equipment, have been among the main causes of a slowdown that “has now continued for five consecutive quarters”, says RenCap’s chief economist for Russia and the CIS, Ivan Tchakarov.
“The economy eked out a miserly 0.1% year-on-year GDP growth in February,” compared with January’s record of 1.6%, he says.
Year-on-year growth percentages gradually slid from 5.0% recorded in the first quarter of 2012 to 1.9% in the fourth quarter, and to 0.9% for the first two months of 2013.
RenCap projects year-on-year growth of 1.4% for the first quarter of 2013 and an increase of only 1% for the second quarter with further deceleration and subsequently two consecutive quarters of negative quarter-on-quarter growth, which “would formally mean a recession”, Tchakarov says.
Fixed investment has started growing, but “more feebly than hoped”, while industrial production contracted in year-on-year terms both in January and February with its softest reported figures since 2009.
Consumption spending – many bankers and economists see consumer-related sectors as the chief motive force of today’s Russian economy – is still expanding but “has lost a lot of lustre”, the economist says.
According to RenCap, there are three main conditions for Russia’s growth to accelerate in 2013: faster global growth, a recovery in domestic investment, and an accommodating monetary policy by the Central Bank.
“While we think the first assumption is still likely to materialise, despite growth concerns in Europe and contagion risks from Cyprus, the second and third assumptions now look harder to justify,” Tchakarov says.
“Investment spending is struggling to recover, while the CBR [Central Bank of Russia] may start cutting rates a bit too late. The proposed appointment of [former economics minister] Elvira Nabiullina as the new CBR governor might help in terms of imparting a more dovish touch to the central bank, but it might come too late in the game,” he says.
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