Despite extremely favourable shifts in the terms of trade, real GDP growth has slowed in 2005 and is set to decelerate gradually over the projection period.
This is largely the result of a policy-induced deterioration in the investment climate at a time when capacity constraints were already starting to affect performance.In these circumstances, mounting pressure for further fiscal easing should be resisted. The cut in the value-added tax now being considered by the authorities would be particularly ill-advised, as it would needlessly stimulate already booming consumption, fuelling inflation and undermining competitiveness. The central bank will probably have to tighten monetary policy and accept a faster rate of rouble appreciation if it is to get inflation back on a downward path. A renewed structural reform effort, underpinned by fiscal discipline, could boost investor confidence and contribute to increasing potential output.
|Population (000s), 2004||143 500|
|Area (000 sq km)||17 075|
|GDP (Billion USD), 2004||581.4|
|Life expectancy at birth (Women, Men), 2003 ||72.2, 58.8|
|Total labour force (000s), 2004||72 909|
|Indicators||% change unless otherwise indicated|
|Real GDP growth||6.1||5.7||5.3|
|Fiscal balance (% of GDP)||8.3||4.0||2.5|
| Primary fiscal balance (% of GDP)||8.3||4.8||3.2|
|Current account balance (% GDP)||12.3||9.2||5.5|
© OECD Observer
, No. 252/253, November 2005