Russian economy’s growth rate slowed down in August and in the third quarter of the year. It is now close to zero and may even become negative, Kommersant daily reports with reference to official agencies and independent analysts.
According to the Ministry of Economic Development, in August annual GDP growth was merely 1% – and 1.6% over eight months. The main contributor to that dynamics was the agricultural sector which dropped by over 10% after having demonstrated a stable growth. Industrial output was lowest in the last two years. An essential cause for the weakening economy is a declining domestic demand, experts say. People have started reducing their spending since their incomes decline or come to a halt.
“Even a notable oil price increase (by 37% compared to August 2018) and weakening ruble (which usually means national producers’ higher price competitiveness) could not compensate for the negative consequences of a declining domestic demand”, experts of the Development Center of the Higher School of Economics note.
The trend may develop further in the environment of the cuts in social spending initiated by the authorities, including the pension reform.
“Low economic growth (or stagnation, to put it simple) can easily become a decline”, Sergei Khestanov, assistant professor at Equity Markets and Financial Engineering chair, Department of Finance and Banking at the Russian Presidential Academy of National Economy and Public Administration, believes. “2018 world football championship (and its huge government funding) is now in the past, whereas the oil price growth rate is insufficient to ensure a sizeable growth of Russia’s economy. History repeats itself and now the situation is very much like in the late USSR. Economy’s gross output keeps growing while living standards are on the way down already”, he says.