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Russia’s growth prospects: what about aging?

Kaspar Richter's picture

Spare a thought for the economist.

While in the past, people might have resorted to reading tea leaves to figure out what their future has in store for them, these days, at least on economic matters, people turn to the next available economist. But while economists are great at analyzing the past, predicting the future is still a complicated task.

In order to come up with projections, economists look at data. Now, it turns out that economists are often making long-term assessments based on the latest news. Take a look at these growth projections for ten years ahead for Russia, based on polls of economists conducted by Consensus Economics, along with actual growth in the year of the projections (Figure 1).  Clearly, while long-term projections are less volatile, the two are correlated – the better the present the better the future, and vice versa. In particular, long-term projections have noticeably nudged down since the crisis.

Figure 1: Actual Growth and 10-Years Ahead Growth

 

Projections for Russia (percent), 2004 to 2012

Will the Real Small Business Please Stand Up?

Munawer Sultan Khwaja's picture

Browsing through a large departmental store in Yerevan, I selected a tie, pair of trousers and a shirt to make up for having arrived in the city before my suitcases did. The store manager pointed me to three different cash counters for the three items I had purchased.  “But isn’t this all one store,” I asked in my inadequate Russian, that never fails to amuse native speakers. “Perhaps,” she smiled. “But never mind; these are different otdels (units).”

While governments around the world try to use simplified regimes to decrease the compliance burden of small and medium-sized enterprises (SMEs), it also opens the door wide open for larger businesses to abuse these regimes either by hiding as a small business, or splitting a larger business into smaller units. This is particularly true when there are few checks on firms entering the simplified regime. Think aforementioned department store!

To succeed, Kenya only needs to look within

Wolfgang Fengler's picture

“So how are you enjoying living in paradise?” Michael Geerts, the former German ambassador to Kenya asked me the other day.   He was posted in Nairobi during the difficult years in the end of the 1990s, and continues to stay in touch with a country he loves dearly. Many colleagues, who once worked in Kenya have bought houses in Nairobi, and plan to retire in the “city under the sun”. But not everybody shares their passion and faith in the country’s future. There are many pessimists who feel that the country is moving in the wrong direction. Kenya, they say, will never rid itself from grand corruption, and crime such as drug trafficking will continue to flourish.
 
Are they seeing the same country? Maybe both perspectives are right, because Kenya is a country of extremes.

Caribbean growth: business as usual not enough

Andrea Gallina's picture


“For the first time, I saw that the Government was thinking about the same issues as I was. I didn’t know.”

These hotel owner’s words are characteristic of many in Saint Vincent and the Grenadines. In many OECS countries, trust between the public and private sector may be at historically low levels but the implications for policy making are enormous, particularly at a time in which tough choices need to be made.

Evidence That Trade Does Reduce Poverty, But Only If the Conditions Are Right

Raju Jan Singh's picture

Market negotiations. Source: Raju Jan Singh/World Bank.While most economists accept that, in the long run, open economies fare better in aggregate than do closed ones, many observers fear that trade harms the poor. African countries, for example, have experienced significant improvements in trade liberalization in recent decades. But Africa remains the poorest continent in the world. It seems that the large gains expected from opening up to international economic forces have been limited in Africa, especially for poor people.

So does trade reduce poverty? In a recent World Bank Policy Research Working Paper, my colleague Maëlan Le Goff and I examine this question, looking at the connection between poverty and trade liberalization in 30 African countries between 1981 and 2000. Our results suggest that trade does tend to reduce poverty, but only in specific settings: in countries where financial sectors are deep, education levels high, and governance strong.

Speeding Up Budget Transparency

Lauren Clyne Medley's picture

international money and receipt

Last Tuesday, the World Bank Institute, or WBI, hosted a panel discussion on speeding up budget transparency efforts and supporting inclusive development around the world. The conversation highlighted the 2012 results of the International Budget Partnership's, or IBP's, Open Budget Survey.

During the event, IBP Director Warren Krafchik and WBI Vice President Sanjay Pradhan discussed the survey's results with high-level finance ministry officials from Afghanistan, Brazil, and Liberia.

Has Africa outgrown Aid?

Wolfgang Fengler's picture

Africa’s emergence is the new consensus. For the second time in a just few months, a major international journal has run a cover illustrating newfound optimism about the continent. After The  Economist’s mea culpa (correcting its previous assessment of a “hopeless continent”), TIME magazine just re-ran an earlier title: “Africa rising”.

This is no fluke: Africa’s economies are growing and the continent is much wealthier today than it ever was – even though, collectively, it remains the poorest on the planet. Many African nations (22 to be precise) have already reached Middle Income Country (so called “MIC”) status and more will do so by 2025. Today, Africa includes a diverse “mix” of countries, ranging from the poorest in the world to the fastest growing; from war-torn countries to vibrant democracies; from oil-rich economies to ICT champions, and the list goes on.

Five conditions to create wealth. Has your country met them?

Oscar Calvo's picture

También disponible en español

In the context of a global economic slowdown and the search for balanced economic growth, I offer some elements for discussion.

All countries aspire to strong, sustainable economic growth given that it makes reducing poverty and expanding opportunities for all citizens much more feasible. There is no doubt about that. But how are high rates of growth achieved over the long term?

Prospects Daily: Global stock markets rallied on Friday

Financial Markets…Global stock markets rallied on Friday, with the benchmark MSCI world equity index hitting a 20-month high level of 552.16, as positive economic data from the two world’s largest economies boosted market sentiment. Along with robust U.S. labor and housing market reports, China’s better-than-expected fourth-quarter GDP growth (y/y), buoyant industrial production and retail sales figures added to signs that the global economic recovery is gaining traction.

Japanese yen fell further against the dollar, sliding to a 2 1/2 –year low of 90.21 per dollar in early-morning New York trade, amid speculation the Bank of Japan may start open-ending asset buying program later this month. The yen has depreciated 13% versus the dollar in the past 3 months as the Japanese government signaled greater stimulus measures to boost slumping economy, which may lower the currency and stoke inflation.

U.S. Treasuries rose slightly on Friday, with the benchmark 10-year yields sliding 2 basis points from the highest level in a week to 1.87%, as growing concerns over the country’s debt ceiling debate revived demand for the safe-haven government securities. U.S. lawmakers need to raise the nation’s $16.4 trillion debt ceiling next month, and they will also have to deal with the $110 billion in automatic spending cuts and an expiring short-term measure that funds government agencies in March.

High-income Economies…US consumer confidence fell for the second month in a row in December, with the Thomson Reuters/University of Michigan consumer confidence index declining to 71.3 from 72.9 the previous month. More than a third of consumers referred to concerns related to fiscal cliff negotiations. The consumer expectations sub-index slipped to its lowest since November 2011.

UK retail sales fell 0.1% (m/m) in December, with sales only 0.3% (y/y) higher than a year earlier, underscoring the weakness of consumer spending as the economy continues to struggle after emerging from a double-dip recession in the third quarter of 2012.

Poland's industrial production plunged 14.2% (m/m) in December, the steepest fall in almost four years, with annual industrial output falling 10.6% (y/y). A part of the decline was due to fewer working days in December, but also reflects weak domestic demand and difficult economic conditions in key Euro Area export markets.

New industrial orders in Spain fell 1.5% (y/y) in November, reversing the 5.5% gain seen in October. While consumer goods orders fell 1.4% (y/y), orders of capital goods and energy products increased 4.7% and 7.5%.

Developing Economies…China's GDP growth was reported at 7.9% (y/y) in the fourth quarter of 2012 showing a strong rebound from 7.4% growth in the third quarter.

Quarterly GDP growth rates have been revised for the last three quarters of 2011 and the third quarter of 2012. The revised quarterly growth rates were reported at: 11Q1 - 2.2%, 11Q2 - 2.4%, 11Q3 - 2.3%, 11Q4 - 1.9%, 12Q1 - 1.5%, 12Q2 - 2.0%, 12Q3 - 2.1% and 12Q4 - 2.0% respectively compared with the earlier 11Q1 - 2.2%, 11Q2 - 2.5%, 11Q3 - 2.4%, 11Q4 - 1.7%, 12Q1 - 1.5%, 12Q2 - 2.0% and 12Q3 - 2.2%. The revised quarterly numbers suggest a deceleration in GDP growth to 8.2% in the fourth quarter of 2012 from 8.7% reported in the third quarter.

Annual GDP growth was reported at 7.8% in 2012, the weakest growth rate since 1999 and lower than 9.3% achieved in 2011.

Industrial production in China grew 10.3% (y/y) in December, accelerating from 10.1% rise in November. Retail sales expanded 15.2% (y/y) in December, faster than the 14.9% growth in November. China's urban fixed asset investment in the 12 months through December increased 20.6% (y/y). Monthly price increase for the newly built homes was registered in 54 of the 70 cities surveyed. On an annual basis, 40 cities reported increase in prices in December compared to 25 cities in November.

Chile's central bank kept its monetary policy rate steady at 5.0%. Inflation in Chile eased to 1.5% in December 2.1% in November remaining below the central bank’s 3.0% annual target.

Mexico's central bank left its benchmark interest rate unchanged at 4.50%, but indicated that it is considering monetary easing in light of weak growth and moderating inflation.

World Bank’s Global Economic Prospects, January 2013 featured in The Economist.

Why Have FDI Flows to Emerging Europe Remained Stable in Recent Years?

Gallina Andronova Vincelette's picture

Eleven of the less prosperous members of the European Union – Bulgaria, Croatia1, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia (EU11)—have remained attractive destinations for Foreign Direct Investment (FDI). The Czech Republic, Estonia, and Slovakia witnessed FDI levels in 2012 similar to pre-crisis levels. Poland and Bulgaria also experienced large gains in FDI in 2012.

Africa: Using ICTs for transformational development

Tim Kelly's picture

Africa is advancing by leaps and bounds in adoption and use of information and communication technologies (ICTs) in the private and public sectors. A new report, “eTransform Africa”, shows how innovations that began in Africa – like the use of dual SIM card cellular phones or using mobile technologies for remittance payments – are now spreading across the continent and beyond.

Haiti: top five wishes for 2013

Hasan Tuluy's picture

También disponible en español y francés

Three years after the earthquake, Haiti has made gains in key development areas including education, the economic environment and managing the risk of natural hazards. In this video blog, World Bank regional Vice President Hasan Tuluy shares his top five wishes for Haiti in 2013.

Prospects Daily: Euro Area services PMI rises; Brazil’s industrial production slows; Philippines’ 2012 inflation improved

Financial Markets…The Standard & Poor’s 500 Index added 0.1% in Friday morning trade and the dollar weakened 0.2% versus the euro after a U.S. Labor Department report showed a slightly slower than expected employment growth in December. The S&P500 has advanced 4.1% this week, gearing for its largest weekly gain in 13 months.

10-year U.S. Treasury yields rose 4 basis points to 1.95%, paring some losses after climbing to a nine-month high of 1.97% before a government report on U.S. employment. Treasuries extended losses yesterday as investors feared the possibility of U.S. Federal Reserve ending its $85 billion monthly bond purchase program sometime this year.

Developing-stock markets fell for the first time in 10 days, with the benchmark MSCI index sliding 0.6% from a 17-month high closing yesterday, after Fed policy makers said they may end their stimulus monetary policy. Emerging-market stocks jumped 108% during the first round of so-called quantitative easing, and they have advanced 9.5% since the U.S. Federal Reserve announced a third round on September 13.

High-income Economies…U.S. nonfarm payroll employment rose 155,000 in December, below the 161,000 increase in November, with a slower pace of increase in private sector employment and a drop in public sector employment. The unemployment rate held steady at 7.8% in December.

U.S. factory orders were flat in November, following a 0.8% (m/m) rise the previous month. However, nondefense capital goods order excluding aircrafts – a proxy for future business investment – rose a robust 2.6% (m/m) following a 3% rise the previous month. The ISM non-manufacturing index for the U.S. index rose to 56.1 in December (the highest reading since February) from 54.7 in November.

Euro Area consumer price inflation remained steady at 2.2% (y/y) in December according to preliminary estimates, the same rate as November, as a weakening pace of year-on-year increases in energy prices was offset by a slight pickup in food and services inflation. The overall inflation rate remains above the European Central Bank’s 2% target.

Markit’s services Purchasing Managers’ Index (PMI) for the Euro Area rose to 47.8 in December from 46.7 in November, suggesting a slower pace of contraction in services sectors (An index level below 50 indicates contraction). Despite an earlier reported modest decline in the manufacturing PMI (to 46.1 from 46.2), a composite index that includes both manufacturing and services rose to 47.2 from 46.5 in November.

Services PMI for Germany rose above the 50-mark to 52.0 in December from 49.7 in November. PMIs rose in Italy (to 45.6 from 44.6) and Spain (to 44.3 from 42.4), but fell in France (to 45.2 from 45.8). Services PMI for Ireland fell to 55.8 from 56.1, but indicating a still robust pace of expansion.

German retail sales rose 1.2% (m/m) in November, almost reversing a 1.3% drop the previous month. Retail sales were 0.9% lower than a year earlier in November.

Developing Economies…China’s HSBC business activity index for service sector declined to 51.7 in December from 52.1 in November suggesting a continued, but somewhat weaker expansion of service sector activity in December compared to November. An earlier survey by China Federation of Logistics and Purchasing (CFLP) and the National Bureau of Statistics suggested that that China's service sector growth accelerated to a four-month high in December.

Residential property prices in China increased for the first time in nine months in December, though at a marginal rate, indicating that the property market is on a recovery path. The house price index, which measures the average cost of a new home in 100 major cities, moved up 0.03% on an annual basis in December, ending eight months of declines.

Inflation in the Philippines edged up to 2.9% in December from 2.8% in November, mainly on the account of higher inflation for food, beverages and tobacco. The annual average inflation rate in 2012 at 3.1% was the lowest registered over the past five years. Inflation in 2012 was also significantly lower than 4.7% attained in 2011.

Brazil's industrial production decreased 1% (y/y) in November following a 2.5% growth in October, pulled down by decrease in production of capital goods. On a monthly basis, industrial production also fell by 0.6% in November.

Meanwhile, Brazil’s Markit Economics activity index for services sector, which increased to 53.5 in December from 52.5 in November, suggests that service sector expanded at the fastest rate in nine months in December.

Prospects Daily: Global equities decline after US budget talks stall and US consumer confidence falls

The Prospects Daily will be on Winter recess and will resume on

Wednesday January 2nd, 2013.

Financial Markets…Global equities declined and US Treasuries gained after the Congress failed to agree on a plan to allow higher taxes on those earning more than $1 million as budget talks stalled. The MSCI All-Country World Index dropped 0.8% at 10:44 a.m. in New York and the Standard Poor’s 500 Index slumped 0.9%. The Stoxx Europe 600 Index slid 0.4%, falling from a 19-month high. US Treasuries rose, with the yield on 10-year Treasuries decreasing five basis points to 1.75 percent.

The MSCI Emerging Market Index slid 1.1%, its biggest drop in more than five weeks. China’s stocks retreated from a four-month high on concern that the rally from the beginning of this month was excessive. The Shanghai Composite Index fell 0.7%. India’s Sensex slid 1.1%.

High-income Economies…US durable goods orders rose 0.7% (m/m) in November, following an upwardly revised 1.1% gain in October. Orders for capital goods excluding defense and aircraft – a proxy for future business investment – rose 2.7% (m/m) building on an upwardly revised 3.2% gain in October.

US consumer sentiment, however, slumped in December, with the Thomson Reuters/University of Michigan consumer sentiment index falling sharply to 72.9 from 82.7 in November, reflecting consumers’ concerns about uncertainty over negotiations on tax hikes and spending cuts that are set to come into effect in the new year.

UK GDP growth for the third quarter was revised slightly down to 0.9% (q/q) (implying an annualized rate of 3.6% q/q) from the earlier reported 1.0%. Despite the downward revision, this was the UK economy's best performance since the second quarter of 2010.

Denmark’s GDP grew at an annualized 1.2% (q/q) in the third quarter, following a 2.8% annualized decline in the second quarter.

Canada’s consumer price fell to the lowest in three years in November, declining to 0.8% (y/y) compared with 1.2% in October. On a monthly basis, prices fell 0.2% due to declines in fuel costs and automobile prices. Inflation is now below the central bank’s 1%-3% target range.

Poland’s retail sales growth slowed to 2.4% (y/y) in November from 3.3% in October, falling 6.4% (m/m), pointing to a slowing consumer demand amid high unemployment. Poland's unemployment rate rose to 12.9% in November from 12.5% in October.

Developing Economies…Argentina's industrial production dropped 1.4% (y/y) in November and declined 2.1% (m/m) versus October, due to slowing down of Brazilian demand for Argentine automobiles as well as decline in investment and domestic demand.

Brazil's unemployment rate dropped to 4.9% in November from 5.3% in October. November figure was the lowest since December 2011, when the jobless rate was 4.7%.

Colombia’s GDP growth slowed to 2.1% (y/y) in the third quarter from 4.9% in the second quarter, to a large extent due to a 12.3% drop in construction. On a quarterly basis Colombian economy contracted 0.7% (q/q) in the third quarter. The Government of Colombia lowered economic growth forecast for full-year 2012 to 4-4.5%, due to weak expansion in the third quarter, from a previous targeted 4.8%.


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