In another downgrade of its forecast for the growth of Russia’s economy, the World Bank said on Wednesday it expects the Russian GDP to grow at a rate of 1.2% this year, Reuters reported. The financial institution held its 2020 and 2021 forecasts at 1.8%.
Its latest revision — made in the twice-yearly Global Economic Prospects report — is still more optimistic than Russia’s own projection of 0.8 percent.
The curtailed expectations parallel the World Bank’s downgraded forecast for global growth from 2.9 percent to 2.6 percent.
Real GDP growth exceeded expectations in 2018, reaching 2.3 percent despite international sanctions. The bank had said the rise was largely due to “one-off effects in [non-residential] construction” and the football World Cup that Russia hosted last summer.
But growth stalled in the first quarter of this year, reaching only 0.5%. Vladimir Tikhomirov, chief economist at BCS Global Markets, attributed the first quarter 2019 underperformance to three factors — weak consumption as consumers had to absorb the pension age increase and a higher VAT rate in January, as well as much more unpredictable warmer winters that lower utilities output, a big contributor to the GDP number, as well as slower growth of state military orders.
The Bank of Russia estimates that the GDP growth will be equal to 1.2-1.7 percent this year, compared to 2.3 percent in 2018. It forecasts that increased budget revenues will be used to raise government spending, including investment, so that subsequent years might see higher economic growth rates.