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Russia Economic Report

Latest Issue: 
  • no. 42

Weaker Global Outlook Sharpens Focus on Domestic Reforms

December 4, 2019: 42nd issue of the Russia Economic Report

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The World Bank’s Russia Economic Report analyzes recent economic developments, presents the medium-term economic outlook, and provides an in-depth analysis of a particular topic. In this issue, Part 1 covers external sector developments, real sector trends in Russia, balance of payments, the labor market, wages, productivity, poverty, monetary policy, financial sector developments and fiscal policy. Part 2 provides an economic outlook for Russia, including growth and poverty projections. Part 3 focuses on Russia’s wealth, measured comprehensively to include produced capital, natural capital, human capital, and net foreign assets.

After a weak performance in the first half of 2019, helped by monetary easing, faster public spending and some one-off effects, economic growth in Russia picked up in the third quarter at 1.7 percent, y/y. Consequently, our 2019 forecast has been revised upwards to 1.2 percent (from its previous reading of 1 percent).

Globally, growth has weakened substantially in 2019, reflecting a broad-based slowdown in industrial activity and global trade. Slowing external demand and the OPEC+ agreement weighed on Russia’s exports performance. Crude oil prices fell 14 percent in January-September 2019, y/y, reflecting a downturn in the world economy.

Domestically, relatively tight monetary policy in the first half of 2019, weak real disposable-income dynamics due to higher inflation on the back of the VAT rate hike, and a slow start in the implementation of national projects dampened growth in 2019. A decline in the labor force and in the number of employed people, due to population aging, continues to be a drag and has not been yet compensated by the recently increased retirement age.

Projected growth at 1.2 percent in 2019 and between 1.6 and 1.8 percent in 2020-2021; poverty expected to decline modestly

Growth in Russia is expected to be 1.2 percent in 2019; 1.6 percent in 2020; and 1.8 percent in 2021. A less restrictive monetary policy and increased spending on national projects is expected to help foster growth. National projects are expected to contribute about 0.1 percentage points (pp) to GDP growth in 2020 and about 0.2-0.3 pp in 2021.

The moderate poverty rate is expected to continue to decline in 2019 and through 2021, although vulnerability needs to be monitored. Increasing the existing means-tested programs and expanding their reach would help to reach the goal of halving poverty by 2024.

Downside risks to the growth forecast prevail

Key risks to the growth forecast include a weaker global economy, elevated trade tensions, and domestic factors. External adverse shocks could spill over into Russia through trade, financial, and commodity market channels. Russia also remains exposed to the possibility of additional economic sanctions, which may further dampen domestic and foreign private investment.

Investment growth relies on the successful and efficient implementation of government infrastructure investment initiatives. Rapid expansion in household credit has triggered a regulatory response, but more measures may be required to mitigate risks to financial stability from the sector.

Increasing export diversification, boosting FDI, and broadening sources of financing require more attention

Russia’s export diversification has been progressing, but only slowly. Driven largely by higher oil prices, in 2018, energy exports accounted for 65 percent of total exports (compared to 59 percent in the previous year). In comparison to other regional oil exporters, Russia has also seen lower numbers of new export lines in the past four years.

New trade agreements of the Eurasian Economic Union (EAEU), such as with Serbia, Singapore and Iran, could expand Russia’s export opportunities.

Previous Russia Economic Reports

Modest Growth; Focus on Informality

Russia Economic Report 41
The World Bank, June 2019

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Russia’s Economy: Preserving Stability, Doubling Growth, Halving Poverty – How?

Russia Economic Report 40
The World Bank, December 2018

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The Russian Economy: Modest Growth Ahead

Russia Economic Report 39
The World Bank, May 2018

Download PDF | Press Release


Russia's Recovery: How Strong are its Shoots?

Russia Economic Report 38
The World Bank, November 2017

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From Recession to Recovery

Russia Economic Report 37
The World Bank, May 2017

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The Russian Economy Inches Forward

Russia Economic Report 36
The World Bank, November 2016

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The Long Journey to Recovery

Russia Economic Report 35
The World Bank, April 2016

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Balancing Economic Adjustment and Transformation

Russia Economic Report 34
The World Bank, September 2015

Download PDF | Press Release


The Dawn of a New Economic Era?

Russia Economic Report 33
The World Bank, April 2015

Download PDF | Press Release


Policy Uncertainty Clouds Medium-Term Prospects

Russia Economic Report 32
The World Bank, September 2014

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Earlier Russia Economic Reports can be downloaded through the World Bank's Documents & Reports.



Apurva Sanghi

Lead Economist for the Russian Federation

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(495) 745-7000

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