23 Sep 2009 18:18

Russian may reach GDP growth rate of 5%-6% in 2011-2012

MOSCOW. Sept 23 (Interfax) - Russia may reach an economic growth rate of 5%-6% a year in 2011-2012, Deputy Economic Development Minister Andrei Klepach said.

"There is substantial potential for growth, most likely not in 2010, but in 2011-2012, associated with an increased trend toward investment, expansion of bank lending. That's the bottleneck for now," Klepach said at a briefing following a government session at which the macroeconomic forecast for 2010 and 2011-2012 was examined.

"Unless bank lending starts to grow, we will not achieve steady growth in the automotive industry, in electricity generation or in agriculture," he said.

The Economic Development Ministry basic scenario approved by the government on Wednesday estimates GDP growth at 1.6% in 2010, 3% in 2011 and 4.3% in 2012.

Klepach said the ministry had prepared three scenarios for the country's socioeconomic development in 2010-2012 as it usually does. "The budget forecast is viewed as moderately optimistic or moderately conservative. It assumes that the recovery we have been seeing in the economy since the middle of the year will continue and become stable. GDP will grow by about 1.6% in 2010 and we will return to the pre-crisis GDP level by 2012," he said.

These growth rates "are rather conservative," he said. Russia, however, will emerge from the crisis "with essentially a new economy," he said. "If we look at the situation with exports, revenue from exports will still be about 30% lower in 2012 than in 2008. Nevertheless, we will essentially reach the GDP production levels [in 2012 compared to 2008] even with smaller export revenue and fewer opportunities for capital inflow from global financial markets," he said.

In addition, the structure of the economy "will undergo some positive changes. While the epicenter of the crisis is currently machine-building and construction, these sectors will demonstrate higher growth rates in the future given the recovery and then the transition to growth," he said.

The Russian economy has great potential for growth, and one of the key issues over the next three years will be how much efficiency and labor productivity can be raised, how much power capacity can be reduced and how the structure of exports can be changed, he said.

An additional package of measures will also be implemented in 2010-2012 in addition to the support measures already envisioned in the budget, he said. In particular, such measures will include support to housing construction via the stimulation of the private sector, to farming and exports of agricultural products as well as to healthcare and education, he said.

Asked how oil prices will affect the pace of the Russian economy's recovery, Klepach said one of the scenarios of the forecast envisions higher oil prices. The base scenario envisions Urals oil trading at $58 per barrel in 2010 with a $1 increase in each 2011 and 2012, which "means virtually stable prices in real terms. Nevertheless, there is a high likelihood that prices will remain at the level of about $70 per barrel and then rise up to around $80. This would add roughly 0.6 percentage points to 1.5 percentage points [economic] growth in addition to the trends already envisioned in the budget," he said.