According to the analysis of Higher School of Economics (HSE), the Economy Ministry of Russia (EMR) is overoptimistic in its projections of inflation and the economic growth.
Even the pessimistic EMR forecast results in 3.7% GDP growth in 2013, contrasting with 2.6% of HSE forecast. EMR scenario is also quite inconsistent. The government believes that Russia will continue to grow despite the slowdown in EU – the major consumer of Russia’s oil and gas.
The stability of the Putin’s regime rests on the prudent macroeconomic policy during the last 15 years. Alas, now the political imperatives intervene into the government’s economic analysis. In Russia, the government’s economic calculations must demonstrate the feasibility of goals declared by politicians. The gap between the economic reality and a picture made up for Mr Putin is dangerously widening. For instance, MED is planning 7.2% of investment growth next year despite the record capital outflow from the country.
Misleadingly optimistic forecasts cause inefficient economic policies. The government substitutes institutional reforms by direct financing of pet projects. The federal budget is balanced when GDP grows by 4%, but if the real economic growth is just 2% the deficit will skyrocket. Business can’t rely on the government’s economic forecasts anymore and is loosing trust in the quality of macroeconomic policy. In the face of increased uncertainty, business curbs its investment activity. As a result even 2% of economic growth will be difficult to achieve if energy prices fall.
