World Bank keeps steady Russia outlook
2011-03-30 17:37:55
The World Bank maintained a steady outlook for Russia on Wednesday that includes 4.4 percent growth this year while also warning about the risks of inflation and an over-dependence on energy exports.
The global body slightly downgraded Russia's growth forecasts from the 4.5 percent it issued in November in its last country report.
The World Bank also urged the government not to engage in "complacency" and - with oil prices still high - follow through on deep-rooted structural reforms it had been promoting for much of the past decade.
"With strengthened growth in its largest trading partner, Western Europe, and oil prices on the rise, Russia is expected to grow by 4.4 percent in 2011, followed by 4.0 percent growth in 2012," the World Bank report said.
But it cautioned that the figures depended on steady gains in consumer consumption and an easing of the long-term credit market.
And it added that the "downside risks associated with highly volatile oil prices and global demand will remain."
Russia recorded 4.0 percent growth in 2010 after a 7.9-percent contraction in 2009 that came on the heels of the global financial and economic crisis and the subsequent implosion of world demand for the country's oil and gas exports.
The World Bank outlook is in line with Russian government expectations of at least four-percent growth this year. But Deputy Prime Minister Igor Sechin in January issued a 2012 forecast of at least six percent.
The report made particular notice of inflationary pressures and the government's excessive monetary response to the 2009 economic downturn.
"The rapid monetisation of the economy during the first eight months of 2010 has proved to be excessive and has led to a buildup of inflationary pressures," the report said.
"As a result, managing these pressures and the resulting inflationary expectations will not be easy, given the escalation in world food prices, which add to price increases and negatively affect inflationary expectations.
It noted an 8.8-percent jump in year-on-year prices in Russia in December 2010 - up dramatically from a 5.5-percent increase that July.
The report stressed that Russia's main challenge now was "to sustain reforms under the conditions of a new oil windfall" - advice it has included in most of its 24 post-Soviet reports on the country.
"Economic policy should focus on the short-term objective of controlling inflation and making medium-term adjustment towards a long-term, sustainable level of non-oil fiscal deficit and a more productive, diversified economy," the report said.