13 Oct 2010 14:21

Russian economic growth could slow to 3%-3.5% in 2011, if fuel-energy investment wanes

MOSCOW. Oct 13 (Interfax) - The pace of Russia's economic growth could slow to 3%-3.5% next year if investment programs in the gas, oil, and electric power sectors are not implemented, Deputy Economic Development Minister Andrei Klepach told the State Duma budget committee on Wednesday.

"Our basic forecast [4.2% economic growth in 2011] is based on a rather large surge of investment in the gas complex, in oil and electric power. These plans are extremely large, if they are substantially altered by the force of production problems or because that kind of money cannot be borrowed on the domestic and foreign markets, the there will be a decrease in investment demand. The economic growth rate in that scenario will not reach the parameters built into the budget and growth will be around 3%-3.5%," Klepach said.

There is a more conservative scenario associated with lower prices for oil and gas, and also a slower world economy than is now forecast, Klepach said. "For us, that is accompanied by brakes to our exports and a worsening of the terms for companies' borrowing. In that case, the growth rate in 2011 could be around 2%-2.5%," he said.

These risks are in the forecast, the government is considering them, he said, "But we think that the forecast that lies at the base of the budget is sufficiently conservative and, and the same time, optimistic, because it assumes there will be a significant surge in investment and in modernization, mainly in the fuel and energy complex." The effectiveness of projects in machine and aircraft-building, of state budgetary spending needs to increase significantly, as state investment demand "will stagnate" in coming years.

"Nevertheless, we think that we have presented a conservative, but sufficiently balanced forecast construction, that is in line with the main parameters of monetary-lending policy and that we have every opportunity to achieve the built-in growth rate [4.2%] and carry out the social program that is in the budget," Klepach said.