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Russian growth slows to 2.9%

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MOSCOW, Nov 12 AFP

November 13 2012, 03:19AM

Russia's growth slowed to 2.9 per cent in the third quarter this year, the statistics office says, in a sign its economic activity is being hit by the global economic crisis.

The Russian economy, hugely reliant on oil and gas exports, enjoyed relatively buoyant growth of 4.9 per cent and four per cent respectively in the first two quarters this year.

Growth in the third quarter last year was five per cent. The figure of 2.9 per cent growth for the third quarter 2012 from the same period last year is a preliminary assessment that may be revised later.

The assessment "indicates that the pace of economic activity has moderated," said Ivan Tchakarov, chief economist at Renaissance Capital in Moscow, in a note to clients.

"The slowdown was driven, on the demand side, by softening consumer spending and, on the supply side, by weaker manufacturing activity and a poor agricultural harvest."

He forecast that the economy will endure a "soft patch" until the first quarter of next year due to the poor global economic environment but then see brisker growth from the second quarter.

Julia Tsepliaeva of BNP Paribas said in a note to clients that although the high oil price was favourable for Russia, its economic slowdown is likely to continue.

"In the long run, Russia's ability to maintain economic growth rates of 3-5 per cent will depend on its willingness to promote structural reforms and suppress corruption," she said.

Russia, which is able to run a relatively stable budget, has so far avoided the economic troubles that have befallen the euro zone and is chiefly concerned that the woes of a key trading partner will impact its economy.

"The government is clearly intent on pursuing a stable domestic policy, using budget spending to keep the economy growing at approximately 3.5 per cent annually," said economists at state-owned Sberbank who forecast 3.8 per cent growth for 2012.

Yet many commentators are worried that the failure of President Vladimir Putin to embrace wholehearted reform and wean the economy off its petrodollar dependence could consign Russia to years of mediocre growth in the future.