3 Dec 2019 17:06

Russian economy growing stably but is vulnerable - Klepach

MOSCOW. Dec 3 (Interfax) - Russia's economy is growing stably but is very vulnerable, according to VEB.RF head economist Andrei Klepach.

"The problem isn't that we don't have stable growth, we do, though it's very vulnerable. If there's a global recession, that will inevitably have an effect on [Russia's] economic growth. The problem is that this growth, even if it's more than 2%, isn't what we need, in terms of domestic tasks and in terms of our competitive position in global markets. This might be an even more serious challenge than whether or not we have stable growth, we do," Klepach said at Vedomosti's financial forum.

He estimated that GDP growth in 2019 will be 1.3%, possibly 1.4%, and will accelerate to 1.8% in 2020.

"We were expecting an even stronger slowdown [of the Russian economy in 2019]. Our estimate for this year was 1.1%. It's clear that for the year, it will definitely be more like 1.3%, maybe even 1.4% growth, because the third quarter was fairly good, and that was primarily thanks to agriculture, the weather," Klepach said, also noting the positive effect of earlier-adopted measures of state support for agriculture.

"As for next year, our estimate is growth of about 1.8%, the government says 1.7%. And here it must be understood, somehow we forget, next year is a leap year, one day is approximately a third of a percentage point of GDP. The calendar is also working for economic growth," he said.

The slowdown in 2019 is not of a surprise, partly because of the base effect, Klepach said.

"The slowdown this year was generally expected, because it was related to a set [of factors] - I don't even want to talk about the Central Bank's contribution, with its high (despite the beginning of a decrease) interest rates and other measures, and extremely tough budget policy, but nonetheless, there were a number of temporary factors: the end of the World Cup and the construction that was connected with it, with the Crimean Bridge, which had a significant effect, plus the completion of a number of Novatek projects. I'm not even talking about various statistical errors and last year's records," Klepach said.

He said that the problem is that some industries are truly stagnating. "We see domestic transport practically stagnating, including automobile transport, which generally reflects the difficult situation in trade, although wholesale trade is growing, if you believe Rosstat. I don't know how much it's growing or not, since the numbers aren't very reliable, but it's growing, nonetheless, and its contribution to GDP is extremely significant, because it's almost 10% of GDP," Klepach said.

Meanwhile, agriculture is seeing growth. "The extractive industry has slowed down, as expected, and it's clear it'll slow down next year, too, but manufacturing is growing for now. Construction is weak, which was also expected, and clearly even weaker than statistics show, although we'll find out about it only for the year as a whole. Basically you can't really believe any number, even a quarterly one, but still, there'll be a plus there," Klepach said.

Investment growth is sure to see some acceleration next year, he said; despite businesses' conservative policy, state investments through the National Projects will begin to be realized. "Next year there'll be growth of state investments for the first time in, as I understand it, the last six to seven years. This is also an impulse for both private business and GDP," Klepach said.