Russian economy to fall into abyss?

Did Russian economy slide down in recession or is it „safe“ stagnation. The difference between stagnation and recession is minor and it is technical nature, but the misunderstanding  on terminology also has political dimension.

We can say for sure that the economy slowly but constantly slows down. This process in valid from 2011.

According to information from federal state statistics, index of gross domestic product (BDP) in second quarter of 2013 has rose for 1,2 % on year level. In second quarter 2012, rise of BDP was 4,3 % comparing to the same period in 2011.In first quarter 2013,increase of BDP has slowed down on 1,6 %.

Minister for economical development deputy Andrej Klepach said that the experts from Ministry still hope for positive trends in third quarter. He has admitted  that the information on preliminary estimate of economy growth in second quarter done by Rosstat was worst than expected. In April Ministry expected growth of 2,1 % in second quarter. Corrected April’s estimate of Ministry for annual growth BDP is 2,4 comparing to estimated 3,6%.

For time being Ministry did not revise their forecast for third quarter that shows expected growth of 2,5 %.But, slow dynamics of previous months leaves small chances to gain this result. According to some leading measures, economy falls down. PMI index of business activity published by HSBC fell under 50 points, what is the sign of economy crisis.

International company for researches Capital Economics states that according to the results in first six months this year, Russian economy has went into recession. Since there are not final information from Rosstat, we can predict that we will see classical recession, or, fall in economy for two quarters in a row. There is not doubt that Rosstat and economy institutions will postpone giving statements on this unpleasant situation for as long as possible. They understand better than anybody before that slow growth at  oil prices rise and mining growth is weary.

Minister Ulyukayev did not reject revision “Strategies2020”.”Without big changes in institutional surroundings it is hard to count on the fact that the growth will be significantly bigger than the rest of the world in average,” said the minister.

Experts from Capital Economics confirm that the slow dynamics of BDP is connected to decline in consumption  and investments.Possibilities for maneuvers in such short period is only in area of monetary action .For example, reduction in the rate of inflation can have positive influence on real income and increased consumption.

Increase of budget expenditures could make statistics look better, but, general budget expenditures have decreased for 1,4 % on 5,9 trillion roubles.Annual income plan has been implemented with 48,6 % what is also not a good indicator.

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