Growing Risks: Russian Economic Report No. 26
World Bank, Moscow and Washington D.C. No. 26
26 Pages Posted: 16 Sep 2011 Last revised: 28 Dec 2012
Date Written: September 15, 2011
The risks to the global economy are growing and so are risks to Russia’s growth. Russia’s short-term economic and fiscal situation remains favorable because of high oil prices with an almost balanced budget this year. But the balance of macroeconomic risks has shifted toward an uncertain growth path as inflation pressures subside and external risks rise sharply. The large non-oil fiscal deficit requires concerted medium-term fiscal adjustment to reduce vulnerability in the face of new shocks, to replenish fiscal buffers, and to move toward a longer-term sustainable level of non-oil deficits.
With heightened external risks because of the slowdown in the United States and the European Union, the sovereign debt crisis in Europe and attendant decline in oil prices, we now expect Russia’s real GDP to grow 4 percent in 2011 (down from 4.4 percent expected in June). Although the aggregate, short-term unemployment picture is favorable, unemployment remains very high in many regions, especially in the North Caucasus district, reflecting investment climate, and structural factors. After five years of little improvement in poverty, with more moderate growth than before the crisis, further gains in poverty will be more difficult, requiring a concerted effort at improving the effectiveness of public expenditures and the targeting of social programs.
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