A 3% economic growth potential is lacking

Prime Minister Dmitry Medvedev presented during a meeting of the Russian Government a forecast for economic growth rates in Russia in the next three years. In 2015 economic growth rate is expected to reach up 2% y-o-y and then accelerate up to 3% and beyond by 2017, said the Prime Minister.


We previously made an assumption that the Russian economy is unlikely to see a short-run growth due to a large-scale capital outflow from the Russian economy, lack of growth in the fundamental factors and growth prospects of the total factor productivity (this indicator includes contribution to growth of such factors as the quality of institutions, investment climate, infrastructure, etc.).
The expert community mentions, among growth factors, import substitution, growth in consumers’ demand, and high prices of crude oil. In our opinion, import substitution and demand can maintain GDP growth rates only at a certain positive level (plus/less 1%) within three years to come, provided that favorable terms of trade remain intact (which after the crisis of 2008–2009 and to date have been supported by  positive values of economic growth).
These factors, however, are unlikely to show any potential for growth of up to 3% and beyond. Moreover, according to a IMF’s recent warning, if the most dismal economic effects of the conflict in Ukraine are finally become real and developed countries put into action their intentions to impose sanctions on Russia, an economic growth value of more than 3% would have to be forgotten.
Maria Kazakova, PhD in Economics, Head of Economic Development Department, Deputy Head of International Center for Budget Sustainability Study