Russian economic growth slowed
April 22, 2013
Growth in the Russian economy slowed to 1.1 percent in the first quarter of 2013, a sharp decline from the 4.9 percent observed during the first quarter of 2012. This is the weakest quarterly showing for the Russian economy since the last quarter of 2009, reports the Financial Times.
Faced with falling commodity prices, particularly for oil, and weakened trading partner, experts are concerned that the Russian economy could slip into recession during the next 12 months. Russia is the world's second largest producer of oil and attributes 60 percent of its annual exports to oil and natural gas.
Expectations for the year revised down
"We are not in a recession yet, but we could end up there," said Russian economic minister, Andrei Belousov reports the BBC. "We expect growth in Russia to stay extremely sluggish in 2013-14 and our forecasts remain well below consensus. But this is largely due to structural factors that have caused trend growth to slow, rather than to the effect of lower oil prices."
The Russian economy actually contracted by 0.4 percent in February 2013, though was buttressed by a spurt of growth the following month. Taken on its own, growth in the once rapidly expanding economy was actually up 2.3 percent from the pervious year. Due to the weak performance of the economy during the first three months of 2013, the state official revised down its growth projections for the year, forecasting 2.4 percent growth instead of 3.6 percent.
Other so-called BRIC nations, which include Brazil, India and China, have also reported slowed growth during the first part of 2013, noted the BBC. Russian Prime Minister Dmitri Medvedev blamed the recent slowdown on the weakness in trading partners' economies.
In response to the economic downturn, President Vladimir Putin has called for a withdrawal from Russia's National Welfare Fund so that long-term infrastructure investments can be made. Putin believes that such a program will help stabilize wages and the overall direction of the economy.
According to the Financial Times, Putin has been reluctant to give in to calls for increased deficit spending.
"It is obvious that budget measures alone are not enough to achieve this task, and changing the budget rule would lead to certain risks," said President Putin.
Russia was pushed to the point of default in the early during the early 90's by large foreign debts, notes the Times.
It is unknown how much money from the welfare fund will be used, or toward what projects it will be put, though there is speculation that that nation's rail system will be a primary beneficiary.
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