Economy overview

In this article we have studied how the main macroeconomics indicators have been changing for the past 4 years. 

Macroeconomic dynamics
Russian GDP annual growth in 2010-2012 was 4% on average. Dmitry Medvedev approved economy development scenarios for the period 2013-2030 in March 2013 where the average annual growth rate was 3-3.2%. However, the Russian Economy slowed down in 2013 already; the rate was 1.3%. This year GDP growth rate has started decreasing even before US and EU sanctions took place. For the first half of 2014 it grew only by 0.8% and even a sharper decline is expected. It is worth noting that the situation seems to be even worse if we subtract the contribution of the 2014 Olympic Games, which is estimated at 0.3%.

Key factors show that the economy run out of steam by 2014 (Table 1).


Among the mentioned factors the dynamics of investments in fixed capital is the most interesting one. It represents the money that is to come back into economy in the form of manufacturing output increase and, therefore, GDP growth. Unfortunately, the statistics is disappointing: the increment rate fell from 20.6% in 2011 to 5.3% in 2013. There is also a decline for the first half of 2014. Consequently, the second half of the year is also likely to show another decrease for obvious reasons. Certainly, in the short term the accumulated experience should be rich enough to prevent the economy from falling even sharper, but in the long term, it is a bad sign. 

Apart from the deceleration in the economy, Russia has spent significant resources on the support of Crimea authorities. According to experts’ estimates the Crimea accession costs is somewhere between 70 and 130 billion rubles and Russia will spend even more in the future.  Moreover, western investors have lost confidence in Russia and it will have even greater and more long-term effect on the Russian economy.

Summing up, if you want to forecast the future development of the Russian economy it is important to take into account that even before sanctions it was lagging behind already. EU and US sanctions can pull the economy down and even in case of resolution in the Ukraine, it is too optimistic to expect the growth rate figures of 2010-2012 in 2014 or 2015.

If we try to find plus points, it is worth noting that sanctions can highlight problems in the key industries and it will stimulate the government to invest the accumulated funds in the infrastructure projects with predictable ROI. Although, another scenario seems to be more probable: the economy slowdown will be explained by the effect of sanctions and there will be no changes for good. So far, based on the “sanctions war”, some economists expect recession in the second half of the year, whereas the total GDP growth for 2014 will be around 0% in the best case.