The World Bank has become the latest organization to cut its outlook for the Russian economy, predicting growth of just 1% in 2019.
host of domestic and international factors are holding back the economy, the organization
said in its new forecast published today. The
bank had previously predicted growth of 1.2% in 2019.
slowdown stems from multiple factors, which are compounded by the continuation
of international economic sanctions,” the bank said. Those factors include weak
investment, slow growth in exports, oil production cuts, a hike in value-added
tax (VAT) earlier this year, and weak consumer confidence.
cut follows a string of downgrades over the summer from organizations including
the International Monetary Fund
the Central Bank, the Finance Ministry and
various ratings agencies.
squeeze on living standards also continued into 2019, the World Bank found,
stating that despite a growth in public sector wages, real disposable incomes
fell by 1.3% in the first six months of the year.
Growth is forecast to
pick up to 1.7% in 2020 and 1.8% in 2021, but remain far below both the global
average and other countries in the region. Of the 24 economies in Eastern
Europe and Central Asia studied by the World Bank, only Turkey is set to grow
slower than Russia this year. In 2020 and 2021, the only country Russia will
grow faster than is Belarus.
The slight pick-up in 2020 and
2021 is down to the next stage of the government’s $400 billion National
Projects infrastructure investment programme. However, that program is already
running behind schedule
, and further delays could upset the Russian economy.
decline in public investment, partly related to slow set-up of the national
projects, negatively affected total investment” in the first half of 2019, the
a global level, the forecasts paint a gloomy picture, with growth set to drop
to 2.5% in 2019.
bank added: “Risks to global growth remain firmly on the downside. Confidence
and investment could be dented by a sudden rise in policy uncertainty —
triggered, for instance, by substantial new trade barriers between major
economies or further escalation in geopolitical tensions.”