Russian growth misses forecasts
2011-08-19 10:36:01
Russia's economy grew less than expected in the first half of the year, official data showed Wednesday, as months of high oil prices couldn't overcome the effects of more than $30 billion in capital flight.
Gross domestic product grew by 3.7% on a year-to-year basis in the first six months of 2011, less than the economy ministry's 3.9% forecast.
Russia is struggling to ramp up growth to pre-crisis levels and remain competitive with Brazil, China and India, its peers in the so-called BRIC group of developing economies. Prime Minister Vladimir Putin said in May he expects Russia to double its GDP in the next 10 years and take its place within the world's top five economies.
The latest economic data, however, reveal an economic recovery that was sputtering even before the latest wave of global growth concerns caused Russia's Micex index to plunge over 10% this month and brought down the high-flying ruble. Industrial output grew less than expected in July, while activity in the manufacturing sector that month showed its first decline in 20 months, according to purchasing managers' index data for the period.
"A big part of this is due to the country's capital-outflow problem," said Julia Tseplaeva, chief economist at BNP Paribas in Moscow. "Instead of staying here and having the opportunity to grow and develop, this money is going somewhere else."
Russia's capital outflows—totalling $31.2 billion in the first six months of the year—have been blamed on everything from a poor investment climate to uncertainty ahead of 2012 presidential elections. Neither Mr. Putin—Russia's most powerful politician—nor President Dmitry Medvedev has said whether they will run next year.
The disappointing data came despite prices for oil, Russia's chief export, staying elevated in the period. Russia has raised the average oil price on which its 2011 budget is based, to $105 a barrel from $81 a barrel.
Now, as worries swirl regarding European debt and U.S. growth, analysts have begun lowering their growth expectations for Russia. This month, J.P. Morgan cut its Russian growth forecast for 2011 to 3.7% from 4.5%, citing a decline in oil prices and worsening access to capital markets.
Official forecasts see the economy growing by 4.2% this year.
Fixed investment also came in lower than expected, Wednesday's data showed. It rose by 7.9% in the year to July, compared with an analyst forecast for an 8.8% increase.