IMF cuts Russia's 2014 growth forecast

10th December 2013, Comments 0 comments

The International Monetary Fund slashed Russia's 2014 growth forecast on Tuesday while warning that faster expansion would be hard to achieve without a change in the energy-rich country's economic model.

An IMF team said after concluding a regular mission to Moscow that it was cutting its 2014 growth forecast to 2.0 percent from the 3.0 percent last expected in October.

It added that growth was likely to reach 1.5 percent this year -- slightly higher than the 1.4 percent expansion rate Russian Economy Minister Alexei Ulyukayev predicted at the start of the month.

"Structural reforms should be a critical element of any plan to enhance Russia's growth potential," the IMF team said in a statement.

"Inadequate infrastructure, constraints on access to finance for many firms -- especially small- and medium-sized enterprises -- and skill mismatches in the labour market appear as key obstacles."

The fund in October encouraged Russia "to embrace a new growth model" that relied less on its oil and natural gas exports.

Russia's slowdown has surprised both the government and economists who have been forced to lower their projections for the year several times.

President Vladimir Putin had initially sought five-percent growth for the year that would mark another step in Russia's comeback from an economic implosion suffered during the 2008-2009 global financial crisis.

The government has since conceded that Russia was on track for its worst economic performance in four years. The economy ministry last month further warned that negligible growth was likely for many years to come.

The IMF also said that inflation was running above target and urged against monetary easing steps because they were both dangerous and could prove ineffective since the economy was operating "close to its full capacity".

© 2013 AFP

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