Alexey Ulyukaev: The Lowest Point of Recession in Russian Economy Has Been Passed


On December 9, 2015 Minister of Economic Development of the Russian Federation Alexey Ulyukaev during “government hour” at the Federation Council introduced the forecast for the social and economic development of Russia in 2016 and for the target period of 2017 and 2018.

Alexey Ulyukaev informed that the lowest point of recession in Russian economy had been passed in the middle of this year on the cusp of the 2nd and 3rd quarters. Since July the industrial recession has ceased to deepen. In September-October GDP without seasonality started to grow: 0.2% in September, 0.1% in October and about 0.1% in November. “Regarding the results of 11 months the decrease of GDP is 3.7%,” Alexey Ulyukaev informed. Positive influence on the situation was due to the development of agricultural and mining industry and improvement in the sphere of investments.

According to his words, it was first time since the beginning of the year that in October the capital investment behavior had been positive every month and increased by 0.4%. “It is not much. But nevertheless these factors show that our economy has adapted to the situation,” added Alexey Ulyukaev. “The actual value today is 5.7%. We think that by the end of the year it won’t be more than 7%.”

However there are serious reasons for recovery growth in 2016. The GDP dynamics “year-on-year” will become positive on the cusp of the 1st and 2nd quarters of 2016 and the increase will be 0.7%. The Minister clarified that the result of the 4th quarter of 2015 would be the decrease of GDP by 3.5%, the whole year – decrease of 3.7%. A small decrease is expected in the 1st quarter of 2016 and then the growth begins. The growth of Russian economy is forecast by the Ministry of Economic Development at the level of 0.7% following the results of the 2nd quarter of 2016 and the results of the next year as a whole.

The situation with the real income of the population is expected to improve due to the deceleration of inflation development. The basic variant of the forecast says that in 2016 consumer prices growth will slow down to 6.4%, market demand will increase by 0.2% to the level of 2015. Production inventory is expected to grow because of the reduction of loan rates. The contribution of these two factors – market demand and inventory restoration – will give 1% of GDP in 2016. “We expect the total growth of manufacturing output during 4 years to be 4% in the context of outrunning growth of 5.5% in processing industry,” Minister stated. Since the beginning of 2016 the dynamics of real income of the population will restore. The level of unemployment will not be higher than 5.5-5.6%.

In the target scenario introduced by Minister Russian economy is expected to grow steadily at the average worldwide level, inflation is expected to decrease by 4% and workforce productivity is expected to grow by 5% minimum.

As far conservative scenario with oil price of $ 40 per barrel is concerned Alexey Ulyukaev noted that it was not a threat for macroeconomic stability in Russia. “Of course, it means less opportunities for economic growth, investments but it does not mean fundamental risks for macroeconomic and budget balance and for socioeconomic situation in general,” he said.

According to his words, oil prices volatility period is about 2-3 quarters. “There is a great chance that since the middle of 2016 a new balance between supply and demand on the oil market will be found,” he added. In Minister’s opinion, decrease and increase are possible till this time. But at an average the Ministry of economic development expects the oil price in 2016 to be $ 50 per barrel.

As for rouble exchange-value Alexey Ulyukaev noted that it was connected with oil prices and trade balance. But there is another factor – capital flow that, according to the Central Bank of Russia, changed from negative to positive in the 3rd quarter. In this regard Alexey Ulyukaev noted that the chances for increase and decrease of rouble exchange-value were even.