Measures Effective in the Short-Term Prospect will Result in the Inflation Rate

The IMF revised downward the forecast of growth of Russian economy in 2013 from 3.3% to 2.5%.

The factor behind the slowdown was weakening of the investment and external demand. IMF experts came to a conclusion that it is pointless to stimulate the economy by means of public spendings and easing of the monetary policy as it results in a higher inflation rate and less confidence in the Russian government's economic policy. For that reason, IMF analysts call on the country's leadership to carry out structural reforms.

As can be seen from Fig. 1 below, generally, IMF forecasts of Russian GDP in 2013 – those forecasts were prepared in the period from January 2012 till April 2013 – point to a downside trend; in our view it is justified.


 Source: IMF, World Economic Outlook (various issues) (

Fig. 1. Dynamics of IMF forecasts of growth rates of Russian GDP in 2013–2014 and in the period from January 2012 till April 2013 as % of the previous year


The official statistical data published by Rosstat in April-May makes the forecast of development of the Russian economy in the short-term prospect more negative. As seen from Fig. 2 below, a drop in industrial output was accompanied by a decrease in investments in capital assets, retail trade turnover and building.  It is to be noted that from March growth in the consumer price index was observed along with a stable low level of the rate of unemployment (at the level of 6% on average in January-March 2013), which is evidence of the fact – as experts repeatedly pointed out – that output in the Russian economy is at its potential level.


Source: Rosstat.
Fig. 2. Dynamics of a number of the main macroeconomic indices in January–May 2013 as % of the previous year


As was stated above, in such conditions efforts to stimulate economic growth by means of measures proposed by the government and effective in the short-term prospect will result in a higher inflation rate, rather than the so much sought after macroeconomic stability and sustained high growth rates in the long-term prospect. 

М.V. Kazakova,  PhD (Economics), Head of the Economic Development Department