As Russia’s Economy Ministry warned the country risks sliding into recession, how to avoid that was a main focus of a major investment forum in Moscow.
GDP growth in the first quarter was just one percent. That was way down on the government’s five percent forecast.
A weak Europe has cuts back on energy use, that highlights a lack of the promised diversification of Russia’s economy:
Economist Jean Michel Six of Standard & Poor’s told euronews: “When commodity prices start going down, especially oil and gas prices, it is obvious that all these issues impact the Russian economy. And at the moment the structural problems and the lack of diversification become more evident.”
Europe accounts for half Russia’s foreign trade and half of its budget revenues still come from oil and gas sales.
President Putin recently ordered ministers and advisers to come up with solutions.
The joint head of Sberbank’s investment department, Ruben Vardanyan, welcomed that: “Establishing the right diagnosis is very important, and it’s reassuring (for investors) when the government has a sound assessment of the situation in the country and takes necessary steps to change it. I think the “alarm call” in the first quarter makes this a good time to take counter-measures.”
Prime Minister Dmitry Medvedev has said the government will consider stimulus to avert recession, but his first deputy Igor Shuvalov said that hasty moves to boost growth by spending were wrong and dangerous.
“The most important (thing) is not to descend into a discussion of any fiscal measure to tweak the situation artificially to show that our growth rate starts changing dramatically,” Shuvalov said.
“Should the government do something hastily? I think that there should not be any hasty reaction, because it is erroneous and dangerous.”
And the incoming head of Russia’s central bank Elvira Nabiullina said that continuing the steady reduction of inflation remains the priority.
Our correspondent in Moscow, Natalia Marshalkovich, concluded: “So, Russia is still a huge market rich in natural resources. But high commodities prices can’t mask the structural problems of the economy anymore. And it’s starting to have an impact on investor’s priorities.”