There’s a chill wind sweeping over Moscow – and it’s nothing to do with the unforgiving Russian winter. In November, Russia’s statistical service revealed that third-quarter GDP was just 1.2 percent up on the same period last year, making it increasingly likely that the government will miss its full-year growth target of 1.8 percent.
A week earlier, the economic ministry had slashed its long-term forecast of Russia’s average annual GDP growth through to 2020, from 4.3 percent to just 2.5 percent. As Economy Minister Alexei Ulyukayev admitted, that’s below the expected global average for the period (let alone that of the rest of the BRICS). Suddenly, stagnation is the big worry in Russia – a far cry from the seven per cent plus growth Russia enjoyed in the early years of President Putin, who once claimed that Russia would be one of the world’s top five economies by 2020.
Moreover, by the ministry’s own admission, Russia can’t blame its problems on anyone else. Its economy is still over-reliant on energy exports, which are now under threat from the US’s re-emergence as an energy exporter (indeed, many think that even these downgraded forecasts are based on an over-optimistic view of long-term energy prices). And while it has made some moves towards reducing red tape, international investors still have concerns about business competitiveness, productivity and the rule of law.