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Economic downturn could be delayed until 2019

Экономический спад может затянуться до 2019 года

In Russia continues to spin a spiral of recession. This is the conclusion reached by the authors of the analytical review “Comments on state and business” for the period of November 5-25 development Center of the Higher school of Economics (HSE).

According to the forecast of experts, the GDP in the current year will fall by 1.5%, and the recovery from the recession is delayed at least until 2017. It is noted that negative expectations are shared by almost all participants of the consensus forecast, compiled by the development Center of the HSE in mid-February. Only one expert out of 31 expects a return to positive economic growth rate in 2016 (three months ago there was 13 of 29).

According to analysts of the center of development, the recession in the Russian economy may be delayed to 2018-2019 year. This will happen when world oil prices at the current level of $35 per barrel and the continuation of the trend to external insulation, and administrative suppression of economic activity.

“Overall, the January statistics gave another reason to doubt that the economy emerged from recession, the survey States. – Formally in the third and fourth quarters, economic activity has increased, but recent data suggest that the exacerbation of negative trends. Consumption and investment (or construction) demand remains weak. Save in the next 3-4 months of increased inflation will impede real wage growth of the population. The volume of exports, according to available statistics close to the limit. The prospect of tightening fiscal policy in 2016 threatens to further worsen the situation with the internal demand”.

Experts note that “the development of the situation in subsequent years will be determined by the dynamics of oil prices and the government’s policy.” “While maintaining oil prices at current levels and the lack of progress in promoting entrepreneurial activity, the authorities will have to make further budget cuts. And this might lead to a further deepening of the economic recession”, – analysts say.

The authors of the review note that many of the experts avoided to make longer term forecasts, so the resulting assessment of the prospects up to 2022 more reflect the opinions of optimists. And last but not expect in this period of increasing oil prices above $60 per barrel, and the average annual growth rate of the economy under these conditions more than 1.5-2%.

The analysts expect inflation in 2016 will grow by 1.4 percentage points to 8.9%, and in subsequent years is just 0.1-0.2 percentage points. However, medium-term inflation target of the Bank of Russia (by 4% in 2017-2018) experts seems to be unattainable even in the next 10 years, says the review.

Salaries in Russia meanwhile continued to decline. HSE analysts indicate that the level of dollar wages in Russia has already become lower than in China. Thus, the average annual salary in Russia is about $7 million against nearly $10 thousand in China. Real wages in January fell by 6.1% compared to the same period last year – and given the low base of January 2015, when it was first recorded dramatic decline in annual terms (by 8.4% against January 2014). The risks of a further fall in real wages due to the expected recession in 2016 – only increase, experts say.

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