| The World Bank believes that the Russian economy is simply lucky Western experts admire the quantitative indicators of economic growth in Russia, but they assess its quality much more modestly. Yesterday, the chief economist of the Russian office of the World Bank, John Litvak, presented another report on the Russian economy .
Despite the ominous thirteenth serial number, the report does not predict troubles or crises for Russia. The forecast for 2006 results made by the World Bank even exceeds the expectations of the Russian government. “Significant net capital inflows, together with income from commodity exports, are fueling domestic demand. GDP growth for the year could reach 7%,” the review says.
It should be recalled that the Russian government last week also revised its GDP forecast upward, but did so with greater caution. From 6.6%, the GDP growth rate was increased to 6.8--6.9%. However, according to the authors of the World Bank report, “the success of the Russian economy is largely its luck, and not its merit.” The growth is due to non-tradable sectors and the service sector, that is, those sectors that benefit from the strengthening of the ruble. But this same factor reduces the competitiveness of domestic goods.
Almost half of GDP growth in the first half of the year came from trade and construction, while manufacturing growth continued to decline. Further development of this sector, according to World Bank analysts, will be hampered by rising energy tariffs and lack of investment.
“The stagnation of production, the need for large investments in the fuel and energy complex and rapidly growing domestic demand are causing increasing concern. Higher energy tariffs could become another limiting factor for the growth of Russia's manufacturing sector,” the report says.
The policy of the Russian authorities in the fuel and energy complex causes dissatisfaction among international experts. Thus, the World Bank believes that the key issue for the development of the gas and electricity sectors is the provision of investments. The fact that the Russian authorities are trying to solve it on their own (in other words, by nationalizing these industries as much as possible) leads to a vicious circle effect. Due to the reluctance to allow foreigners into strategic sectors of the economy, investments will have to be obtained from domestic sources and these costs will have to be offset by rising tariffs. In turn, increasing tariffs will negatively affect the growth rate of industrial production.
Another mistake that, according to the World Bank, the Russian authorities are making is tightening their policies towards migrants. “A more unfriendly and restrictive environment for migrants could have a negative impact on the labor market,” the report’s authors believe. Moreover, Russia's need for guest workers to ensure high growth rates even exceeds those of Western Europe, so the introduction of restrictive measures may reduce GDP growth rates.
This forecast is especially dangerous due to the fact that the engines of Russian economic growth - construction and trade - are also leaders in attracting foreign labor. And whether they will be able to demonstrate the same growth rates with the involvement of only Russian citizens is still a big question. However, and the authors of the report admit this, the West also does not know how to solve this problem. “Western European countries also face similar contradictory problems, when, on the one hand, there is a need for migrant workers, and on the other hand, there are serious social tensions associated with mass migration into the country,” admit the authors of the report. Isolde KOSTNER |
| |
