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Economic Growth Thanks to Government Investment
// Ministry of Trade and Economic Development Presents Economic Prognosis for 2007-2010
Yesterday the Russian Trade and Economic Development Ministry published its prospectus for the social and economic development of the Russian Federation until 2010. The ministry's macroeconomic predictions will be the basis of the upcoming three-year (2008-2010) budget.
The document released yesterday was the third and presumably final version. The only significant change from previous drafts was an increase in the lower threshold of inflation for 2007, from 6.5-8% to 7.5-8%. The new version also presented a much more detailed description of the nuts and bolts of Russian economic growth, including a prediction that oil prices will stabilize or even fall, while the "innovative investment component of growth" will take off, thus strengthening competition, increasing labor productivity, and accelerating production and salary growth.
Exports, a key factor in recent growth, will decline from 2.6% (out of a 6.4% increase in GDP) in 2005 to 1% (out of a 6.1% increase in GDP) in 2007. By 2010, they will contribute no more than 1-1.5% of annual GDP. Meanwhile, increased investments (including government investment in infrastructure) will contribute between 0.25% and 0.47% of annual GDP growth, and "the increasing rate of growth in investment in the innovative sector of the economy and high-tech industrial projects" will add another 0.25%. Increases in personal income are also expected to boost GDP growth by 0.07-0.1%. The ministry is clearly counting on the government as a chief investor and initiator of a variety of public "national projects." "The role of government economic policy and the investment climate will increase significantly," says the document.
Many experts, however, believe that the ministry's predictions, while basically accurate, will likely prove overly optimistic. Analysts such as Vladimir Pantyushin of Troika Dialog accused the ministry of being nothing more than a mouthpiece for President Vladimir Putin's grand plans.
Alexei Shapovalov
All the Article in Russian as of Feb. 20, 2007
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