Minister believes Russian economy will avoid recession

PanARMENIAN.Net - The Russian economy will avoid a recession but is in a period of stagnation caused by high levels of social spending and structural problems, Russia’s top economic official said in an interview published by Kommersant newspaper Monday, Aug 12.

“Stagnation is probably an appropriate term [to describe the Russian economy],” Economic Development Minister Alexei Ulyukayev said in his first interview since he was appointed to the position in June, according to RIA Novosti.

Russia's economy grew just 1.2 percent in the second quarter of 2013 compared with a year earlier, according to estimates released by the State Statistics Service on Friday, the sixth consecutive quarter of falling growth, and the worst performance since the 2009 recession.

While Ulyukayev conceded that the economy was tanking, he denied that it was entering a sustained period of contraction. "There is no recession. And there will not be one," he said, Kommersant reported. Problems were being caused by “institutional, structural and macroeconomic factors,” Ulyukayev said, singling out high levels of social spending as an underlying reason.

“We have very high spending levels that are caused by a certain set of conditions that cannot be scrapped,” Ulyukayev told Kommersant. “Russia is a middle income country but we have shouldered social obligations higher than those middle income countries usually have.”

The Russian economy slowed to 3.4 percent growth last year, from 4.3 percent growth in 2011, and in recent months experts and officials have reduce their growth forecasts for this year. The Economic Development Ministry cut its 2013 growth forecast from 3.7 percent to 2.4 percent last month.

“We are less optimistic about the outlook for 2013 and 2014, as, in addition to a weak institutional framework, economic policy is becoming increasingly enigmatic,” analysts from Sberbank CIB said in a research note Monday.