Russia’s economy minister said on Monday that dramatically slowing growth indicated the country had entered a period of possibly prolonged stagnation but that an outright recession was avoidable.
Alexei Ulyukayev’s comments came after the first initial estimate on Friday showed that second-quarter growth slowed to 1.2 percent in annual terms compared with 1.6 percent over the first three months of 2013.
The London-based Capital Economics consultancy estimated that Russia had already entered a recession — defined as two quarters in a row of negative quarter-on-quarter growth — based on the January-July figures.
Ulyukayev conceded that the government would probably have to scale back spending over the coming three years because of the unexpected slowdown.
But he also stressed that continuing exports of oil and natural gas would ensure that Russia continued to enjoy expansion — even if at a fraction of the five-percent rate initially demanded by President Vladimir Putin.
“There is no recession and there will be none. Stagnation is probably the appropriate term,” Ulyukayev told the Kommersant business daily in an interview.
But “there are many factors that enable us to say that (second-half) results will be better than they were in the first,” he was separately quoted as saying by the RIA Novosti news agency.
Russia is suffering from a sharp slowing of investment and consumption as well as a continuing inability to solve corruption and economic mismanagement.
The resulting slowdown has turned the energy giant into one of the worst performers among the major emerging markets — its growth a shadow of the average 7.2-percent rate enjoyed by Putin during his first two terms as president in 2000-2008.
The International Monetary Fund warned earlier this year that the economy was operating at full capacity and required urgent structural reforms to achieve more sustainable growth.
Ulyukayev appeared to agree with the IMF’s conclusion by noting that “the very slow rates of growth are explained by institutional, structural and macroeconomic factors.”
“And this is something we will have to work on for a very long time.” AFP