MOSCOW (Reuters) - Russia cut its economic forecasts for the second time this year, increasing pressure on Vladimir Putin to revive growth that has faded since a state spending splurge helped secure his election to a third Kremlin term.
The Economy Ministry slashed its forecasts for 2013 and 2014 after growth in the second quarter of this year was the slowest since the slump of 2009, documents obtained by Reuters on Monday showed.
The news broke as the president made one of his many tours to key industrial regions - this time to Kemorovo in the Kuzbass coalfields - to demand greater urgency in developing Russia’s vast resource base.
The lower growth forecast reflects home-grown problems of weak industrial output - now expected to barely grow this year - slowing investment and a waning of the feel-good factor that helped Putin win a third term as president in March 2012.
Not even oil prices at a historically-high $110 per barrel have been enough to avert the slowdown in the world’s top energy producer - even if Russia’s external surpluses and low debts do shield it from the current turmoil in other emerging markets.
“To grow this time it will not be enough to stimulate private consumption,” said Vladimir Miklashevsky, an economist at Danske Bank.
Miklashevsky was referring to Putin’s past reliance on distributing windfall energy revenues to boost living standards and drive average annual gross domestic product (GDP) growth rates of 7 percent during his first two presidential terms from 2004-08.
The Economy Ministry cut its 2013 forecast to 1.8 percent from 2.4 percent, also hit by weaker exports and consumption growth. The forecast was below median expectations of 2.5 percent growth in a regular Reuters poll of economists.
It downgraded the 2014 outlook to a range of 2.8-3.2 percent from 3.7 percent.
Economy Minister Alexei Ulyukayev has warned that Russia’s $2 trillion economy could stagnate, but played down risks of a recession, even though some economists estimate that real growth has now contracted for two consecutive quarters.
Weaker growth will put pressure on Finance Minister Anton Siluanov’s budget, which is due to go before parliament soon and which foresees a modest deficit next year.
Economists see next year’s forecast as over-optimistic.
“Growth may accelerate next year only if the government increases expenditure substantially,” said Natalia Orlova, chief economist at Alfa-Bank.
The government has already broken Putin’s pre-election pledge to balance the books by 2015, proposing measures that would only increase Russia’s reliance on commodities.
The government has been considering various stimulus measures, unveiling a $13 billion investment plan to build new roads and railways by tapping a rainy-day fund.
Officials and bankers have been pressing, meanwhile, for easier monetary policy to lift growth towards the government target of 5 percent.
The central bank, now led by Elvira Nabiullina, Putin’s former economic adviser, kept interest rates on hold in August. It has said it will start cutting rates when inflation is inside its target corridor of 5-6 percent, expected in the second half of 2013.
The economy ministry kept its inflation forecast for the end of 2013 unchanged at 5-6 percent, but raised its 2014 estimate by half a percentage point to 4.5-5.5 percent.
“The central bank will not cut rates. The global environment is setting higher rates in the world economy and we should not ignore it,” said Orlova.
The rouble fell to its lowest in four years against the dollar-euro basket the central bank tracks, hit by capital outflows as emerging market investors expect the U.S. Federal Reserve to wind down its money-pumping measures.
Writing and additional reporting by Maya Dyakina; Editing by Douglas Busvine, Ruth Pitchford