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Russia's Economy - a Reality Check

Kaspar Richter's picture

Every six months, my colleagues and I get together with other members of the Russian economic report (RER) team, to figure out where the Russian economy is heading.

To do this, we rely heavily on macroeconomic data from the national statistical office, the Ministry of Finance, the Central Bank and other sources. While this sounds straightforward enough (given it’s what economists around the world do when they compile their latest economic assessments) – it’s a rather indirect way to assess the issue.

After all, the economy is driven not so much by data, but by the decisions businesses, consumers and governments make.

The true test for the report is when we take it around Russia and hear from businessmen, economists and government officials whether our take on the Russian economy resonates with them or whether the reality paints a different picture. But there could be more than one ground reality, and different parts of our story resonate with different groups.

For example, two weeks ago, we presented our report to the German-Russian business association (Deutsch-Russische Auslandshandelskammer) at the German embassy in Moscow. Their members saw depressed sentiment in Southern Europe and a weakening economic momentum in many countries, but strong consumption and growing income in Russia. Their perspective was in line with this chart: Russia’s per capita growth this year is set to be higher than Brazil, Turkey and India -- this was unthinkable only two years ago.

 

But the reaction from university students and Leontief Center economists during our trip to St. Petersburg in October was entirely different.

They suggested that the picture our latest RER painted was too rosy. Their assessment was more in line with this graph: Russia’s economic performance since the crisis has been weak, as shown by the large contraction in 2009, the shallow subsequent rebound and the large gap between actual trends and projections on the eve of the crisis.

 

While 2012 might look fairly strong, I think that without reforms Russia will have a hard time to step up growth in the coming years. But I want to ask our readers -- what’s your take on the subject?