Russian economic growth prospects predicted
The Russian economy's growth potential will be limited to 1% until 2035, since the factors that previously contributed to GDP growth have been exhausted, experts from the Institute for Economic Forecasting of the Russian Academy of Sciences (RAS) have warned.
According to the institute’s report, which was seen by the Vedomosti business daily, Russia’s economic growth has for a decade been determined by the rate of increase in exports. Average annual GDP growth has reportedly been around 1%, while exports have grown by 2.5% annually.
The RAS noted the significant impact of strong investment on the economic growth from 1999 to 2008, an increase driven by rapidly growing export earnings based on a strengthening ruble.
After overcoming the 2008 global financial crisis, the Russian economy's growth rate slowed, reportedly attributed to stagnation of foreign income and the exhaustion of opportunities to stimulate demand due to the weakening of the national currency.
According to Vedomosti, the analysts have warned that in the next ten years, the average annual growth rate of exports may drop to just 2%, due to reduced energy demand abroad. Increasing non-energy exports will allow foreign investment in Russia to increase by 1.5% each year over 2024-25. However, this will not be enough to accelerate economic growth, the RAS argues.
The experts believe that average annual GDP growth in Russia will be 0.5% until 2025, climbing to 0.8% in 2026-30, and to 1% in 2031-35. This scenario assumes that the price of Russian Urals crude blend remains at $70 per barrel until 2030, rising to $76 per barrel over the following five years.
The RAS report assumes a ruble exchange rate around 70 to the dollar until 2025, increasing to 73 for the next ten years. Oil production is expected to remain at around 500 million tons per year, while gas output is estimated at 700 billion cubic meters up to 2035.
In order to reverse the trend of low economic growth, the RAS economists called for more focus on developing Russia’s domestic market, with more investment in sectors such as agriculture, passenger transport, and housing construction.
The Russian government maintains a more positive outlook for the coming years. Prime Minister Mikhail Mishustin has predicted that by 2024, the Russian economy will be able to overtake developed countries in terms of growth.
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