IMF / RUSSIA ECONOMY

The IMF's latest forecast says that Russia's economy grew by 4 percent in 2010, aided by the boom in commodity prices, in particular oil. This year, the Fund is projecting growth of 4.3 percent but said Russia "could do much better." IMF

• Categories: News & Features / News Stories / Unifeed
• Video Length: 00:02:43
• Production Date: 27 September 2011
• Asset Language: Original
• Corporate Name: INTERNATIONAL MONETARY FUND - IMF
• Subject Topical: ECONOMIC CONDITIONS
• Geographic Subject: RUSSIAN FEDERATION
• MAMS Id: U110927b

Description

STORY: IMF / RUSSIA ECONOMY
TRT: 2.43
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS

DATELINE: SEPTEMBER 27 2011, WASHINGTON D.C.

Shotlist

1. Wide shot, exterior, IMF
2. SOUNDBITE (English) Juha Kähkönen, Mission Chief to Russia, IMF:
“We forecast the growth over 4.3 percent this year and 4.1 percent next year with inflation being about 7 percent in both years. These are not the impressive numbers for Russia because Russia used to have average growth of 7 percent before the global crises and it’s also benefiting from high oil prices. We project that if economic policies are not strengthened, Russia will continue to muddle through with growth dropping to below 4 percent in the medium-term.”
3. Cutaway, atrium, IMF
4. SOUNDBITE (English) Juha Kähkönen, Mission Chief to Russia, IMF:
“Russia has great potential and could have growth of 6 or more percent on a sustained basis. This would require that economic policies are redirected toward more focus on economic stability and less reliance on oil. Its non-oil deficit is some 6 percent of GDP above what the government and we see as a sustainable level. So there’s a need for Russia to start saving for the rainy day. Second, there’s a need for monetary policy to focus decisively on inflation. The third ingredient for more rapid growth would be better oversight of the financial sector. Finally, for faster growth Russia needs a better business climate.”
5. Cutaway, atrium, IMF
6. SOUNDBITE (English) Juha Kähkönen, Mission Chief to Russia, IMF:
“There are two main risks, both external: the Euro Area crises and the global economic slowdown. Russia is not very much exposed to the Euro Area government debt but if major European banks get into difficulty this would create funding problems for Russian banks. An even bigger risk is if there’s a global downturn and oil prices fall sharply. This would reduce Russia’s exports and budget revenue and trigger a recession.”
7. Wide shot, IMF

Storyline

Russia’s economy grew by 4 percent in 2010, aided by the boom in commodity prices, in particular oil. For 2011, the IMF is projecting growth of 4.3 percent. But Russia could do much better. Before the global financial crisis, the economy was growing at more than 7 percent per year, and it could take off again if economic policies and the supporting policy institutions are strengthened.

“We forecast the growth over 4.3 percent this year and 4.1 percent next year with inflation being about 7 percent in both years. These are not the impressive numbers for Russia because Russia used to have average growth of 7 percent before the global crises and it’s also benefiting from high oil prices. We project that if economic policies are not strengthened, Russia will continue to muddle through with growth dropping to below 4 percent in the medium-term,” Juha Kähkönen, Mission Chief to Russia, IMF said.

Russia also remains overly reliant on oil revenues, which makes it vulnerable to a slowdown in economic growth and a sudden drop in commodity prices.

“Russia has great potential and could have growth of 6 or more percent on a sustained basis. This would require that economic policies are redirected toward more focus on economic stability and less reliance on oil. Its non-oil deficit is some 6 percent of GDP above what the government and we see as a sustainable level. So there’s a need for Russia to start saving for the rainy day. Second, there’s a need for monetary policy to focus decisively on inflation. The third ingredient for more rapid growth would be better oversight of the financial sector. Finally, for faster growth Russia needs a better business climate,” Kahkonen said.

Although Russia has been riding high on the commodity boom, there are concerns about what will happen if prices start to falter.

“There are two main risks, both external: the Euro Area crises and the global economic slowdown. Russia is not very much exposed to the Euro Area government debt but if major European banks get into difficulty this would create funding problems for Russian banks. An even bigger risk is if there’s a global downturn and oil prices fall sharply. This would reduce Russia’s exports and budget revenue and trigger a recession,” Kahkonen said.