Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty – How?
December 4, 2018: 40th issue of the Russia Economic Report
Global growth is broadly stable, but downside risks from rising trade tensions are increasing.
Oil prices have risen this year and remain volatile as Russia’s oil production reached an all-time high. Oil prices have averaged $70/bbl in 2018 so far (up 33% from their 2017 average) and are expected to average $71/bbl over the next three years.
Growth momentum in Russia increased in the first half of 2018, supported by robust global growth, rising oil prices and a macro policy framework that has promoted stability. Real GDP growth totaled 1.3% y/y in the first quarter of 2018 and 1.9% y/y in the second.
Overall, a sound macroeconomic framework, with relatively high levels of international reserves ($461 billion), low external debt levels (about 29% of GDP), and comfortable import cover (15.9 months), positions Russia well to absorb external shocks.
Russia’s growth prospects for 2018-2020 remain modest, forecast at 1.5% to 1.8%. Higher-than-expected oil prices could favorably affect the growth forecast.
Export diversification is limited. Since 2014, Russia’s non-energy export volume growth has been outpacing that of energy and contributing to export diversification. Yet Russia’s progress in export diversification is limited, with the share of oil/gas products still totaling a high 59% in exports of goods in 2017; about 25% of fiscal revenue; and with diversification happening mainly through active (as opposed to new) lines of products.
The May Decree goal of halving poverty by 2024 could be within reach. Driven by a rebound in real wages and disposable incomes on the back of low inflation, the number of poor people decreased by 1.1 million in the first half of 2018. The poverty rate in Russia remains over 13% and is projected to average 12% over the next three years – still above the pre-crisis rate of 10.8% in 2013. However, the poverty rate target of 6.6% by 2024 could be achieved even under a modest growth scenario of 1.5% annual growth.
Taking a longer perspective, various government initiatives could double Russia’s potential growth rate to 3% by 2028, while the trinity of maintaining stability, doubling growth, and halving poverty can be completed:
Russia Economic Report 39
The World Bank, May 2018
Russia Economic Report 38
The World Bank, November 2017
Russia Economic Report 37
The World Bank, May 2017
Russia Economic Report 36
The World Bank, November 2016
Russia Economic Report 35
The World Bank, April 2016
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The World Bank, September 2015
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The World Bank, April 2015
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The World Bank, September 2014
Earlier Russia Economic Reports can be downloaded through the World Bank's Documents & Reports.