Bloomberg News

Russian Economy Slows to Weakest Growth Since 2009 Slump

April 02, 2013

Russia’s economy grew at the weakest pace in the fourth quarter since a recession in 2009 as Europe’s debt crisis prompted companies to cut investment and the government curbed a year-end spending splurge.

Gross domestic product rose 2.1 percent from a year earlier, slowing from an upwardly revised 3 percent in the third quarter, the Federal Statistics Service in Moscow said in an e- mailed statement today. That matched the median estimate of 18 analysts in a Bloomberg survey.

Consumer demand is waning just as a recession in the European Union, which accounts for about half of Russian trade, chokes corporate investment and curbs demand for commodities, hurting sales at companies from OAO Novolipetsk Steel to carmaker OAO AvtoVAZ. The slowdown, which has continued into this year, sparked an argument between policy makers over interest-rate cuts to spur growth with inflation above target.

“Our economic growth of less than 3 percent is stagnation, putting us behind the global economy,” former Finance Minister Alexei Kudrin said at a conference in Moscow today. “We’ll have to fight for 3 percent. And every month so far this year has edged us toward cutting the growth forecast.”

The statistics service reiterated its first estimate of economic growth at 3.4 percent for 2012, down from 4.3 percent in 2011 and 4.5 percent in 2010. Second-quarter growth was revised up to 4.3 percent and the January-March period was cut to 4.8 percent, according to the statement.

Lagging Behind

The Micex Index (INDEXCF) of 50-stocks advanced 1.1 percent in the final quarter of last year, lagging behind a 5.2 percent gain in the MSCI Emerging Markets Index. The Russian benchmark reversed gains after the central bank reduced some interest rates today to trade 0.1 percent lower at 1,427.68 as of 3:27 p.m. in Moscow.

Steelmakers including Novolipetsk Steel (NLMK) and OAO Severstal (SVST) reported net losses in the fourth quarter. Billionaire Alexey Mordashov, Severstal’s chief executive, cited a weakening global economy as a drag on demand.

There’s “virtually no chance” the economy will expand faster than the government’s official 3.6 percent forecast for this year and risks persist that it will grow more slowly, Deputy Finance Minister Alexei Moiseev said at a conference organized by the Vedomosti newspaper March 29.

The Economy Ministry may revise the growth forecast, Deputy Economy Minister Andrei Klepach said at the same conference, declining to elaborate. Russia would grow less than 2 percent in 2013 if output continued to expand at the current pace, he said.

Growing at the 5 percent medium-term target set by Prime Minister Dmitry Medvedev isn’t in the cards for this year, and probably won’t happen in the coming years without a significant improvement in the external environment, according to Klepach.

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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