MOSCOW, June 18 (RIA Novosti) – Russia needs to carry out “ambitious” economic policy reforms to realize the economy’s midterm potential and reduce its vulnerabilities to a slump in oil prices or acceleration of capital outflows, the International Monetary Fund said Tuesday.
“The pre-crisis growth model, based on increasing oil prices and rising use of spare capacity, is no longer viable,” the IMF said in a new report prepared after the conclusion of a regular mission to Russia.
“Growth in the next decade will need to rely on improving efficiency and productive investment – requiring maintenance of stable macroeconomic conditions, further strengthening of institutions, and implementation of structural reforms.”
Economic activity in Russia has been constrained by weak investment and external demand, prompting the IMF to cut again its outlook for Russia’s economic growth for 2013, the report said.
The IMF now expects Russia’s economy to grow by 2.5 percent in 2013 compared with its April forecast of 3.4 percent. The IMF earlier predicted Russia’s economic growth at 3.7 percent in 2013.
The IMF has also cut its forecast for Russia’s GDP growth in 2014 to 3.25 percent from 3.8 percent.
These figures differ from a forecast by Russia’s Economic Development Ministry, which expects the country’s GDP to grow by 2.4 percent in 2013 and by 3.7 percent in 2014.
The IMF also warned against the government’s plans for near-term policy stimulus.
“Fiscal stimulus at this time would likely be ineffective and merely intensify inflationary pressures, given that the economy is operating at full capacity. … Fiscal adjustment should focus to the extent possible on expenditure reductions and on improving the mix and efficiency of spending while preserving space for growth-friendly infrastructure programs and critical social programs,” the report said.
“This will require structural fiscal reforms, including addressing the challenges of steadily increasing long-term pension and health care costs.”
