Page 24 - bne IntelliNews Russia Country report May 2017

3.2 Macro outlook
The Ministry of Economic Development expects GDP growth of 2% in 2017, and 1.5-2.5 percent from 2018-2020.
This relative optimism stems from the government’s view that an observed growth in imports indicates an uptick in investment activity, but it may in fact stem from companies’ desire to increase reserves and strengthen the ruble, notes Natalia Orlova of Alfa Bank. Adds Orlova, continued uncertainty around tax policy is another factor impeding economic growth. But this socially sensitive issue is unlikely to be resolved before 2018, so we can expect growth in 2017 to be less than 1%, she says.
Economy Ministry’s forecast for growth of 3.5% by 2026 will be driven by a growing workforce (raising the retirement age), increasing investment activity and labor productivity, according to an Economy Ministry.
However, a recovery in investment activity is questionable, because Russia is still under sanctions, which restrict access to new technologies. Also, income growth and potential demand growth will be limited during this period – according to the Economy Ministry forecast, real earnings will reach the level of 2013 only in 2022, while pensions by 2035 will still be 4% below the 2013 level. Thus, given these constraints and without structural reforms to the economy, achieving a 3.5% y/y economic growth is quite optimistic.
In its latest outlook update, the European Bank for Reconstruction and Development (EBRD) sees Russia’s GDP growth at 1.2% and 1.4% in 2017 and 2018, respectively . This is a more conservative outlook than that of the Russian government’s, which was recently updated to 2% GDP growth expectations in 2017.
24 RUSSIA Country Report May 2017 www.intellinews.com