Page 50 - BNE_magazine_02_2020

50 Opinion
bne February 2020
At the start of the year Putin predicted growth in 2019 would be 1.8% but it finished the year at only c.1%.
INVISIBLE HAND:
Putin’s economic breakthrough that never was
Liam Halligan in London
"We need an economic breakthrough,” declared Vladimir Putin back in December 2018, during
his now legendary annual press conference. Acknowledging Russia’s gloomy economic outlook, the
President forecast 1.8% growth in 2019, down from 2.3% the year before.
Twelve months on, during this year’s annual Question and Answer Session, the economy was again part of Putin’s presentation. But the headline growth numbers barely featured.
Russia is now the world's largest grain exporter, the President declared, having surpassed the US and Canada. The capital base has modernised, with three-quarters of industrial equipment no more than 12 years old. During his 20-year term of office, as President and Prime Minister, Russia has built three new airports, a dozen new railway stations and the number of major trunk roads has doubled, Putin told his huge audience.
Yet Russian GDP growth of just 1.3% that is officially forecast for 2019 is 0.5 percentage points short of last year’s
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Presidential prediction. The World Bank, in fact, estimates just 1% growth this year, having downgraded its forecast four times since January.
Things didn't go according to plan in 2019.
The Russian economy has suffered a double blow, resulting in five years of falling incomes, which have dragged down Putin’s popularity ratings and fuelled a succession of public protests. Oil prices have fallen sharply over the last half-decade – from an average of $93 a barrel in 2014, to just $56 so far this year, impacting tax and export revenues. On top of that, Western sanctions related to hostilities in Southern and Eastern Ukraine have also stymied growth, as East-West relations have fallen to a post-Cold-War low.
There are signs of a growth uptick, as Putin was keen to highlight. Real wages grew 3.8% during the year to October, with retail sales in November 2.3% up. Russia’s services sector also remains buoyant, with the PMI Services index registering 55.6 in November (measures of 50-plus indicate growth).