The year 2017 developed better than expected for Russia’s economy. While market participants had expected economic growth of just over 1% at the beginning of the year, the economy is now estimated to expand by almost 2% this year. We also estimate the growth rate at between 1.5% and 2% for 2018. We expect private consumption to continue on the path of recovery and economic activity to revive from its low level. This year, the budget deficit will be around 2.0% to 2.5% of gross domestic product; it is planned to reduce it in the coming years to 1.3% (2018) and 0.8% (2019-2020).
As regards monetary policy, the Russian Central Bank has surpassed its 2017 target for inflation. Inflation is likely to climb back up to at least 4% in the coming months. The sanctions and countersanctions imposed during the Crimea crisis and the conflict in the Ukraine are likely to continue in 2018 as well. However, we assess the direct negative effects on the economy as minor.
As regards politics, the presidential elections in March of 2018 are at the focus of attention. President Vladimir Putin is expected to continue as president of the Russian Federation. No major economic reforms are expected. However, it will not be possible to indefinitely postpone necessary reforms such as the one of the pension system and this matter needs to be addressed in the next legislature period. The generational change in leading administration positions will continue and the number of younger “state managers” will rise.
Continued structural weaknesses such as the lack of economic diversification, lower productivity growth in conjunction with a decreasing pool of available labor and the current sanctions are expected to limit trend growth of the Russian economy in the coming years.
Author:
Andreas Schwabe
Raiffeisen Bank International
6 December 2017
 |
Note
Wiener Börse AG would explicitly like to point out that the data and calculations given in this report are historic values, which do not permit any conclusions as regards future developments or value stability. Price fluctuations and loss of capital are possible in securities trading. The contribution is the personal opinion of the analyst and does not constitute a financial analysis or a recommendation for investment by the exchange operating company, Wiener Börse AG.