Russian Economic Report, No. 29, Spring 2013 : Recovery and Beyond

Abstract

Russia's economy grew 3.4 percent
 in 2012, down from 4.3 percent in 2011. The economy of
 Russia slowed in the second half of the year due to weak net
 exports, negative base effects, and destocking at the end of
 the year. More than four years after the global financial
 crisis hit, the world economy remains sluggish. Industrial
 production lost momentum throughout last year, exports
 expanded only at a moderate pace, and imports even declined
 for three month during autumn 2012. Growth declined mainly
 due to weaker performance of investment. Inventories were
 flat as the restocking cycle after the crisis came to an
 end, and fixed investment expanded only moderately as
 business remained cautious about future prospects. The
 weaker performance of the tradable sectors reflects sluggish
 global demand and the poor agricultural harvest but also low
 competitiveness in parts of the industry, as growth declined
 for all three subsectors. The capital account strengthened
 in 2012 as net capital outflows decreased. According to
 preliminary estimates, the capital account deficit amounted
 to US$40.9 billion or 2 percent of Gross Domestic Product
 (GDP) in 2012, compared to US$76.2 billion or 4 percent of
 GDP in 2011. The labor market remains tight. The
 unemployment rate declined across the country, and vacancy
 and replacement rates increased. The number of poor people
 in Russia reached a record low. In the first nine months of
 2012, some 17.2 million of people were below the poverty
 line, three million less than a year ago and the lowest
 number in the last two decades. The weak external
 environment, high inflation, flat oil prices and sluggish
 domestic demand are set to postpone a pickup in growth
 towards the second half of 2013. Nevertheless, modest growth
 and lower inflation are projected to reduce poverty further.