“The economy appears to grow close to capacity, constrained by feeble investment activities and a tight labour market,” the World Bank said in its twice-yearly Russia Economic Report. Russia is now using about 80 percent of its production capacity – almost the same share as in the pre-crisis year of 2007, the report says. However, back then the economy was adding 8 percent annually. In a separate report published on Tuesday, Russia’s Economic Development Ministry made the same growth projection, and the IMF predicted a 1.5 percent growth for Russia in 2013. The three institutions say the slowdown in Russia comes on the back of a lack of investment and weakening global trade. However, Chris Weafer, a senior partner with Macro-Advisory.com, says Russian policymakers have gambled on stability and focused on keeping inflation in check instead of stimulating growth. “Instead of trying to boost growth with spending and policy initiatives the government seems intent on maintaining stability while trying to pull inflation towards 5.5%,” Weafer wrote in an e-mail.
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Russia’s ‘gambling on stability’ fails, growth forecasts take a haircut
