The World Bank predicts stagnation in Russia over Ukraine and sanctions – Moskovsky Komsomolets

The World Bank predicts stagnation in Russia over Ukraine and sanctions – Moskovsky Komsomolets

Economists today published a report entitled “The uncertainty of the economic policy limits the horizon of growth”

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The World Bank has lowered the growth forecast for the base of the Russian economy in 2014 to the level of stagnation – to 0.5% from an expected 1.1% in March, and has prepared two alternative scenarios of economic development – optimistic and pessimistic. Last suggests increase geopolitical tensions and new sanctions.

Photo: Gennady Cherkasov

The basic, most likely, according to the World Bank, the scenario takes into account the tensions between Russia and Ukraine, the preservation of the sanctions, the lack of structural reforms and at the same time preserving a sufficiently high level of stability in the Russian economy. As a result, in 2015 the economic growth rate will fall to 0.3%, and in 2016 will amount to 0,4%.

“The Russian government and the Bank of Russia has managed to cope with the effects of geopolitical tensions in the first half of 2014. Macroeconomic stability has been maintained, and Russia still has significant reserves to maintain stability in the near future (assuming that its access to oil and gas markets will not be limited for an indefinite period of time), “- said in a report.

Alternative optimistic scenario assumes a modest recovery of the economy through the end of geopolitical tensions and the lifting of all sanctions by the end of 2014. In this case, the growth rate will rise from 0.5% in 2014 to 0.9% in 2015 and 1.3% in 2016.

The pessimistic scenario envisages increase in geopolitical tensions and the introduction of new sanctions, resulting in the economy comes a deep recession. Compared with the 2014 year, when the growth rate will be 0.5%, the economy will shrink by 0.9% in 2015 and 0.4% in 2016.

“Russian companies and banks will find it greater restrictions in terms of access to international capital markets, which will lead to a further increase in borrowing costs and lower investment activity – according to the World Bank experts. – Introduction of additional sanctions (including short-term restrictions on trade in natural gas) during the forecast period may lead to an increase in economic uncertainty policy, capital flight, high exchange rate volatility and weakening of the ruble, which will have a detrimental effect on the level of trust and investment activity. ” Nevertheless, the World Bank believed that the international community still refrain from the use of sanctions applicable to the oil trade.

In order to revive the economy World Bank prescribes Russian reform and the development of a new model based on diversification. “Returning to the model aims to achieve high rates of economic growth in Russia will depend on the steady growth of private investment and improving consumer confidence, which require a predictable economic environment and the need to resolve the outstanding issues of structural reform” – according to analysts.

“The main focus of structural reform should be to improve economic institutions to ensure the stability of public finances and the proper management of volatility, improving the quality of education and infrastructure in order to increase the productivity of workers, as well as the expansion of the competitive environment, aimed at stimulating private enterprise and entrepreneurship” , – the report says. The major tasks of the reform for the next decade should be stabilization, education and competition.