Russian Federation
Date: 11 May 2012
The event will be held in Moscow , Russian Federation , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Mr. Alexandre Gorelik
Director
United Nations Information Centre
Russian Federation
Mr. Pavel Kadochnikov
Executive Director, Russian APEC Study Centre
Researcher
Russian APEC Study Center (RASC)
Ms. Liliya Revenko
Professor, MGIMO University
Professor, Russian Foreign Trade Academy
Country briefing note <download pdf file>
A slower economic growth is projected for 2012
• The Russian Federation has a large impact on other economies in the region through trade, investment and remittance channels. The economy continued to grow modestly, expanding by 4.3% in 2011 with a slightly higher rate than in the previous year.
• High inflation dampened private consumption in the first half of 2011, while lowered inflation, favourable oil prices and a good harvest contributed to the stronger economic activity in the second half.
• Labour market conditions improved as evidenced by a decline in the unemployment rate from 7.5% in 2010 to 6.6% in 2011, though it still remained above the level seen prior to the 2008-2009 financial crisis.
• Investment activities also remained subdued, and the stock market was affected heavily by the worsening global risk climate.
• The growth prospects of the Russian Federation are likely to remain dependent on global energy prices. GDP growth is forecast to be 3.8% in 2012. The key downside risk is increasing concerns over the euro zone economies, which may be heading for a further slowdown.
• Volatile commodity prices are likely to have a negative impact on the economy given its continued high reliance on exports of natural resources, mostly on energy related-products.
A high inflation in 2011 starts to decelerate
• Consumer prices increased 8.4% in 2011, partly due to strong nominal wage growth. Inflation decelerated somewhat in the second half of the year as the impact of the 2010 drought diminished. Nevertheless, increased demand, the weakening of the rouble and further adjustments in regulated prices were some of the main sources of sticky inflation.
• Inflation-targeting was introduced for the first time, with a target band of 5-6% for 2011.
• The central bank undertook monetary tightening during the first half of 2011, including lifting its policy rate and raising the reserve requirements. The policy rate was lowered to 8% in December 2011 as price pressures moderated. This action implied that the bank's concerns had shifted towards the increasing risks to growth due to the deteriorating economic outlook.
Rise in government revenue improves fiscal balance
• The Russian Federation had a modest budget surplus of 0.8% of GDP in 2011 after registering a deficit of 4% in 2010. However, the budget continued to rely on revenues from the hydrocarbon sector as its non-oil deficit was about 10% of GDP in the 2011.
Stronger growth in exports improves current account surplus
• The current account surplus increased to 5.5% of GDP in 2011 from 4.8% in 2010.
• High oil prices were the main reason behind the higher surplus as the hydrocarbon sector accounted for around two-thirds of export revenues. Imports also grew, boosted by the economic recovery and appreciation of the national currency during the first half of 2011.
• The Russian rouble changed course in the second half of 2011, dropping by more than 10% against the US dollar. The central bank is gradually moving towards a floating exchange rate from a dual-currency basket consisting of 55% dollars and 45% euros, with the bank intervention confined to preventing excessive currency volatility.
Heavy dependence on the energy sector: need to further diversify the economy
• The economy is highly dependent on exports of oil, gas. Consequently, a sharp fall in external demand or commodity prices would lead to a severe decline in economic activities and, in turn, have a strong impact on economic growth. Therefore, further diversification of the economy is important for achieving higher and sustainable growth as well as greater socio-economic stability.
• Countries with heavy commodity dependence must design and implement policies aimed at reducing their dependency. This is easier to accomplish during the boom years when fiscal and external positions are healthy.
• Progress towards diversification requires strong enforcement of market competition laws as well as relevant investment in infrastructure, which could potentially improve the business environment and contribute to the development of new high value-added export-oriented sectors.
Policy brief: Living with high commodity prices <download pdf file>