According to the World Bank’s report, Russia’s economic decline has slowed considerably due to growth in such sectors as services, construction, transport and communications. Source: Alamy/Legion-Media
The World Bank released its latest forecast for the Russian economy on November 9. The forecast was better than expected, showing the Russian economy shrinking by 0.6 percent in 2016, after which it would grow 1.5 percent in 2017 and by 1.7 percent in 2018. The World Bank had predicted in June that Russia’s GDP would fall by 1.2 percent in 2016.
The latest World Bank forecast is close to the most recent estimates by Russia's Ministry of Economic Development, which show the country's GDP shrinking by between 0.5 percent and 0.7 percent in 2016.
According to the World Bank report, Russia’s economic decline has slowed considerably because of growth in such sectors as services, construction, transport and communications. The forecast also cited figures showing an increase in domestic demand for goods, even as external demand for Russian products remains weak.
The predictions are also based in part on expectations that global prices for hydrocarbons will rise. The Bank’s calculation assumes an average crude oil price of $43.30 per barrel in 2016, $55.20 in 2017 and $59.90 in 2018. Analysts noted that oil production would fall below consumption in 2017, particularly in the second half of the year. This would reduce reserves, leading to a rise in prices. Bank analysts also predict that OPEC will be able to limit global oil production volumes and that oil production in the US will plateau.
The report notes, however, that these predictions are subject to change.
The report states that government spending has played a significant role in reducing poverty and increasing the incomes of Russia’s poorest citizens, particularly over the last eight years. Analysts pointed out that there is less inequality in Russia than in the U.S., Brazil, Chile, Colombia and Turkey.
Apurva Sanghi, the World Bank’s chief economist in Russia, noted, however, that there was still room for improvement.
"Many EU countries with government spending similar to Russia’s — as a share of GDP — achieve a much higher reduction in inequality, and there is room for Russia to achieve more," Sanghi wrote in the report.
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