News / Europe

Russian Official: Economy May Need Stimulus Measures

Reuters
Russia's economy is at risk of sliding into recession by autumn and the government may need to implement stimulus measures to shore up growth, Economy Minister Andrei Belousov said on Friday.
        
"We are not in recession for now, but we may get there - there is such a risk,'' Belousov told reporters, a day after his ministry slashed its growth forecast. "I think that, if by autumn we don't see growth for some period, we may slide into recession.''
        
A year after Vladimir Putin returned to the Kremlin with calls for a "new economy'' to boost investment and shake up state-run industries, Russia's $2.1 trillion economy is close to stagnating.
        
The Economy Ministry on Thursday cut its growth forecast for this year by a third to 2.4 percent, which would be Russia's worst showing since 2009, when the economy contracted sharply as a result of the global financial crisis.
        
Russia's GDP grew at around one percent in the first quarter, weighed down by lacklustre investment and a decline in exports of strategic commodities such as natural gas that were hit by a slump in the European market.
        
The debt crisis in euro zone member Cyprus, a financial centre through which a quarter of Russian foreign investment and lending flows, has heightened concerns, meanwhile, that the Russian economy will be starved of capital.
        
Stimulus near?
        
Belousov's warning is part of a debate over whether the economy needs monetary stimulus to boost growth nearer to the Kremlin's target rate of 5 percent.
        
Putin's choice to run the central bank, Elvira Nabiullina, has emphasised growth as a key policy goal and dialled back ambitions for reducing inflation that, at over 7 percent, is now running above target.
        
Economists expect the central bank to cut rates at the latest when Nabiullina takes office in June, although with Russia on the brink of stagflation many argue that structural reforms, not rate cuts, are what the economy really needs.
        
Russia instituted a new fiscal rule last year that ties spending to a historical average of prices for oil - Russia's main export - while capping the budget deficit at 1 percent of gross domestic product.
        
That may restrict the government's ability to ramp up state spending, but does not rule out other measures designed to improve Russia's investment climate and boost the flow of credit into the economy.
        
"We will propose economic stimulus measures. We will have a meeting with the president,'' said Belousov. "Measures should be taken, as we need to solve the situation we got into in order not to slide into recession.''
        
Russia's post-crisis recovery has been heavily dependent on the consumer, while a hefty increase in government spending before Putin's election in March 2012 to a third Kremlin term also kept the economy ticking over.
        
The weakening outlook does not necessarily herald a full-blown recession, defined in economics textbooks as two consecutive quarters of negative growth.
        
The government is, meanwhile, considering ramping up sales of state assets to raise funds that could be committed to stimulus spending, including the possible sale of a 19.5 percent stake in state oil major Rosneft.
        
"Although we don't expect Russia to fall into recession-authorities' concerns are understandable and a moderate monetary or fiscal stimulus would be appropriate, in our view,'' said Anatoliy Shal, chief economist at J.P. Morgan in Moscow.
        
"In fiscal policy, using back door to bypass the budget rule would be one way to respond to economic weakness,'' Shal added.

You May Like

US Firms Concerned About China's New Cyber Regulations

New rules would require technology companies doing business in financial sector to hand over their source code, adopt Chinese encryption algorithms More

WHO Focus on Ebola Shifts to Ending Outbreak

Focus to be less on building facilities and more on efforts to find infected people, manage their cases, engage with communities and ensure proper burials More

US Scientist Who Conceived of Groundbreaking Laser Technology Dies

Charles Townes, Nobel laureate, laser co-creator paved way for other scientific discoveries: CDs, eye surgery, metal cutters to name a few technologies that rely on lasers More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Super Bowl Ads Compete for Eyes on TV, Webi
X
January 29, 2015 9:58 AM
Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video As Ground Shifts, Obama Reviews Middle East Strategy

The death of Saudi Arabia’s king, the collapse of a U.S.-friendly government in Yemen and a problematic relationship with Israel’s leadership are presenting a new set of complications for the Obama administration and its Middle East policy. Not only is the U.S. leader dealing with adversaries in Iran, the Islamic State and al-Qaida, but he is now juggling trouble with traditional allies, as White House correspondent Luis Ramirez reports.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long-distance communication contains mostly sounds and pictures - for now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Saved By a Mistake - an Auschwitz Survivor's Story

Dagmar Lieblova was 14 when she arrived at Auschwitz in December 1943, along with her entire Czech Jewish family. All of them were to die there, but she was able to leave after several months due to a bureaucratic mix-up which saved her life. Now 85, with three children and six grandchildren, she says she has a feeling of victory. This report by Ahmad Wadiei and Farin Assemi, of RFE/RL's Radio Farda is narrated by RFE’s Raymond Furlong.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid