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World Bank Revises its 2013 Growth Projection for Russia – from 1.8 Percent to 1.3 Percent

December 13, 2013

Moscow, December 13, 2013 – The World Bank revised its September Russia growth projection for 2013 from 1.8 percent down to 1.3 percent as part of its quarterly forecast review. The underlying assumption for this revision is weaker than expected domestic demand, with delayed investment recovery coupled with a slowing in consumption growth.

Growth for 2014 is projected at 2.2 percent, and at 2.7 percent for 2015. The Bank expects that investment activities will slowly pick up, as the destocking cycle comes to an end and consumption growth will level out,” said Birgit Hansl, World Bank Lead Economist for the Russian Federation.

The main drivers for the lower 2014  growth projection of the Bank at 2.2  percent – as compared to its previous forecast of 3.1 percent  – is the assumption of a slower pace in the recovery of investment. The Bank expects that private investment activities will cautiously resume during 2014, but at a slightly lower growth rate than originally projected. The Bank did not change its expectations regarding the projected export recovery during 2014.

The Bank’s revised 2014 forecast also assumes a slightly lower consumption growth rate than originally projected, yet consumption is still expected to grow on average at a healthy three percent. “However, the consumption boom of the post-crisis recovery years is perhaps cooling down, and we might see more steady growth in consumption over the next years,” said Birgit Hansl.

Given continuing high credit growth to households, the stock of private credit increased to over 45 percent of GDP. This credit expansion resulted in an increase in total household indebtedness to more than 25 percent of total disposable income. The increasing debt burden puts pressure on consumption, as interest payments have now reached 5 percent – a significant share of the average household’s income.

The Ministry of Economic Development revised its 2013 GDP growth forecast recently down to 1.4 percent from 1.8 percent, and also lowered its forecast for 2014 from 3.0 percent to 2.5 percent. 

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