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Russia: Growth will remain below long-term trend at 1.5% in 2019/2020 – ABN AMRO

According to Nora Neuteboom, economist at ABN AMRO, Russia’s economic recovery, post the 2014 recession has been sluggish.

Key Quotes

“With growth running at 1.5% in 2017 and around 2% in 2018, Russia’s growth trend is still below its long-term average of around 3.5% over the last 20 years. While higher oil prices have mitigated the adverse impact of new sanctions over the last year, weak domestic factors such as a poor investment climate and longstanding structural inefficiencies are curbing economic growth.”

“That said, while growth may be unimpressive going forward, stability has largely returned. Inflation, while expected to remain above target in the beginning of 2019, is being addressed head-on by the Russian central bank, which increased rates unexpectedly twice last year. Moreover, the government maintains a fiscal framework anchored in a medium-term primary balance target and is adding to its fiscal reserves when the oil price exceeds USD 40/bbl.”

“In 2018, the government balance was in surplus (0.3% of GDP) and is expected to remain in surplus for the coming two years. Moreover, the Russian rouble was dealt a blow amidst heightened risk aversion due to less favourable global conditions in 2018 and rising interest rates in the US. Still, the impact was not as severe compared to some other emerging markets.”

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