Macro Focus - October 2019
Will the Russian economy be able to find the gas pedal?

  • Russia’s GDP growth is expected to remain modest for an emerging market
  • … but its macro-fiscal buffers are strong.
  • The policy mix prioritises stability over growth 

The list of factors that inhibit Russia’s actual and potential GDP growth is long: low productivity, weak institutional quality, sanctions, worrisome demographic trends, insufficient diversification of the economy, and its dependence on commodity prices. However, Russia’s macro-fiscal buffers are strong, with low public debt, government fiscal and current account surpluses, and large reserves. The policy mix has prioritised stability over growth in order to be able to respond to potential external shocks. Russia’s economy will expand only around 1% this year. As, for an emerging market, Russia’s investment-to-GDP ratio is relatively low, the government has set an objective to increase public spending on its national projects. This is expected to accelerate GDP growth in the next few years. However, Russia’s potential output growth will remain modest for an emerging market. The Central Bank of Russia (CBR) has cut its key interest rate already three times this year and has signalled further cuts in order to support investments and mitigate the negative impact of the deterioration in global demand on Russia’s economy.

PDF-Document Read the full analysis/report here (pdf)

Tõnu Mertsina,, +372 888 7589

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