Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
An account already exists for this email address, please log in.
Russia’s rocky recovery is likely to be short-lived
Russia’s economy surprised analysts by growing at its fastest pace in six years in 2018. But investors shouldn’t get too excited.
Russia's economy surprised analysts by growing at its fastest pace in six years in 2018: GDP growth strengthened to 2.3%, its highest level since 2012, outstripping expectations.But investors shouldn't gettoo excited.This pace of growth is likely to be due to "one-off factors", says Anna Andrianova on Bloomberg. These include the $27bn Yamal gas project, and the fact that last year's football World Cup boosted the country's restaurant and hotels sector, which expanded by 6.1%.
On balance, however, there seems little scope for a big rise in consumption in the near future; the labour market is strengthening and credit growth is accelerating but on the other hand households are grappling with stagnant incomes and rising inflation. "We need faster growth, especially after several years of recession," Anton Tabakh, chief economist at Moscow-based credit assessor RusRatings told Bloomberg. The one thing that could give growth a long-term boost by raising the economy's speed limit is structural reform, but there has been precious little progress on this front in recent years.
In order to improveits competitiveness, Russia would have to diversifyits economy. But its "long-standing reliance on raw materials revenues" has hampered modernisation and looks set to keep doing so, says Natasha Turak on CNBC. Between 2005 and 2015, education spending fell by 0.8% to only 2.6% of GDP, and healthcare spending declined by 0.6% to 3.8% of GDP. However, these are two areas the country desperately needs to invest in, according to the World Bank.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Red tape and the fear of having assets seized, a perennial problem in Russia, aren't helping either.The upshot is that annual growth will fall back again soon.
Join more than 165,000 subscribers and keep yourself informed with the latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.
Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.
Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.
