The Russian Economy Faces Challenges in the Forthcoming Years

Today, the Ministry of Economic Development of the Russian Federation published Russia's economic results of November 2014; according to them, Russia's GDP growth rates amounted to -0.5% on the respective period of the previous year.

So, it can be stated that for the first time since October 2009 Russia's economic growth rates entered the negative zone though it is to be noted that according to the Ministry of Economic Development of the Russian Federation in January-November 2014 in general GDP growth amounted to 0.6%.

According to the data of the Ministry of Economic Development, in November a positive contribution to the dynamics of Russian GDP was made by mining industries, utilities (electricity, gas and water) and retail trade, while manufacturing industries, building, paid services and net taxes on goods and import had an adverse effect of GDP growth.

It is to be added that, undoubtedly, along with the above in November the negative factors behind such dynamics of GDP of Russia were deterioration of the international situation, including a threat of further economic sanctions against Russia, unfavorable foreign economic situation and a lack of domestic factors of growth in a situation of unfavorable investment climate in Russia. No wonder, that in December with all the above factors taken into account rather pessimistic forecasts on the prospects of Russia's economic development in the next two years emerged in the expert community. In addition to the above, last week following the Fitch Ratings and the Standard & Poor's the Moody's Investors Service, an International Rating Agency downgraded the forecast of Russia's GDP growth rates in 2015-2016; according to the Moody's, in 2015 the Russian economy will face a recession of 5.5%, while in 2016 the economy is to fall by 3%.

In can be concluded from the above that with taking into account the fact that the Russian economy is vulnerable to a great extent to the international market situation Russian faces serious challenges in years to come. One may argue about the depth of economic recession, however, one thing is absolutely clear: time has come for radical measures to be taken to break that trend. One can only hope that the argument which was put forward earlier on the turning point for the Russian economy after a drop in international oil prices is translated into reality.

Мaria Kazakova, PhD (Economics), Deputy Head of the Department of Research of Budget Stability