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MinEconomy cuts growth forecasts for 2013-15

The Minister for the Economy, Alexey Ulyukaev, said yesterday that MinEconomy had submitted a new deck of macroeconomic forecasts to the Ministry of Finance, to update it on the long-term fiscal projections. The projected growth rates for 2013-15 have been reduced 0.4-0.5pp, with 2013 cut to 1.4% (VTBC: 1.4%) and 2014 to 2.5% (2.2%). The regular cycle of revising official forecasts is to be in April.

MinFin’s work on long-term fiscal planning, which extends all the way to 2030, understandably depends on underlying assumptions about cumulative growth attainable over the forecast period. The changes, which might appear small if viewed for a standalone year, accumulate to a significant difference in terminal year GDP levels if applied across 15-20 years: the difference between 3% and 2.5% growth over 15 years accumulates to a difference of 7%. This is of consequence for the amount of expenditures which are permissible in the long run under the fiscal rule.

We note that the government’s forecasts are converging with our views (although they remain a tad above us). It will be important to watch how this affects the ongoing deliberations about Russia’s fiscal strategy.
Vladimir Kolychev, Daria Isakova
VTB Capital analyst

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