HSE: the Economy of Russia continues to live in the “raw pipe”

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ВШЭ: Экономика России продолжает жить в "режиме сырьевой трубы"

The application on the start in Russia a full-fledged phase of economic growth made in the past year, the officials — from the head of the Ministry of economic development (MED) to Maxim Oreshkin, Russian President Vladimir Putin, are “an attempt to wishful thinking”: the rise in oil prices up to highs of nearly three years gave the Russian economy a short-term rebound from the “bottom”, which in 2018 will come stagnation with a growth rate 7 times lower than the world.

With such a forecast made by experts of the Higher school of Economics (HSE) in the latest issue of “Comments on state and business”.

As suggested by HSE experts, the Russian economy continues to live in the mode of a raw pipe, and the concentration of profits in the industries, producing and transporting mineral resources abroad, only increased, according to Finanz.

The HSE States that already last autumn the pace of growth of the Russian GDP slowed down twice in comparison with the indicators observed in spring: January—September, the economy added only 1.6% (against 3.1% in may). Record for 8 years the collapse of industrial production in November (3.6%) and a decline in investment activity left no chance to the official forecast the MAYOR, which was expecting growth of 2% at the end of the year.

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The Ministry hopes will not come true in the coming year, experts say the HSE: instead of accelerating to 2.2% growth of the Russian economy will slow even three times and will amount to only 0.5% even under the condition that the price of oil, on which depends 60% of foreign exchange earnings of the country, will remain at last year levels.

The HSE indicates that it continues to shrink internal effective demand: growth of the wage Fund in large and medium-sized enterprises has increased over the year by 5%, but considering the small business and informal employment, the salaries increased only 3% in real terms actually contracted.

As a result, the situation is locked in a vicious circle: the lack of money the population is in decline in profit in the business (to 713 billion rubles, or 9% in the whole country), which in turn reduces no scarce resources for investment, without which economic growth is unthinkable: the possibility to invest in the development are only from a limited number of commodity corporations.

“The volume of investments in mining or in transportation and storage (if you take it together with electric power, gas and steam, water supply and waste disposal) is approximately two times higher than the investment in the entire manufacturing industry,” lead example, the authors of the review, adding that this situation speaks not only about “the unwillingness of the Russian economy to exit from stagnation,” but “even raises the question about a possible new recession.”

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Already an established recession — record duration from the beginning of 1990-ies — sent the country for 5-9 years in the past.

In the opinion of the HSE, even the “hydrocarbon doping” is not able to encourage the economy: oil revenues above $40 per barrel, the government aims at buying currency (2 trillion rubles in 2018), the growth of labor productivity in the past year have not exceeded 1.6%, and “non-fuel exports, traditionally limited to metals, chemicals, grain and weapons, shows no signs of diversification”.

“Besides the obvious risks of doing business and demand constraints, a negative investor sentiment fueled by expectations of the introduction of a new package of American sanctions against the Russian big business,” recalls the Director of “development Center” HSE Natalia Akindinova.

“Given these factors and at the current vector of state policy, we expect in 2018 GDP growth of around 0.5% at an annual price of oil at the level of 2017,” she concludes.

 

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