Russia Economic Report, No. 30, September 2013 : Structural Challenges to Growth Become Binding
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Washington, DC
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Russia's economy lost steam in
2013. Growth slowed to 1.4 percent in the first half (H1) of
2013, compared to 4.5 percent in H1 2012. This report
examines in its first part several aspects of the economic
slowdown. It shows that the slowdown was largely the result
of weaker demand, which was due to a combination of external
and domestic factors, some of which are cyclical and others
structural. The structural challenges to the Russian economy
and its growth, such as non-competitive sectors and markets,
are another important factor to consider in the economic
slowdown. The special focus note in part three of this
report discusses the link between growth patterns in Russia,
firm survival and diversification in manufacturing and will
also highlight the impact of limited competition as a
structural constraint. This note looks at the role of growth
volatility as a possible explanation. It examines the role
of surges and slumps in manufacturing output and its
microeconomic implications in the dynamics of emergence and
sustainability of nascent economic activities. The dynamics
of the industrial output of the economy as whole, between
1993 and 2009, are the focus of this study. This note
examines the downturns that magnify and accelerate the
cleansing effects to the economy in forcing inefficient
firms to exit, as well as the upturns that set the
foundations of economic diversification by giving new
economic activities the opportunity to emerge. This note has
three main findings. First, Russian manufacturing output
growth is characterized by a higher volatility than other
comparator countries. Second, this volatility is mostly
driven by more numerous, deeper and longer slumps and is
mostly associated with aggregate slumps that have yearly
effects. Third, while the economic surges increase the
probability that productive firms remain in the market, the
same is not true of economic slumps-older firms, not
necessarily more productive ones, are more likely to survive
the downturn. Furthermore, in sectors in which competition
is less fierce, firms have a higher likelihood of weathering
a slump.
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ACCOUNT DEFICIT, ADVANCED ECONOMIES, AGRICULTURE, ANNUAL GROWTH, ASSET PORTFOLIOS, AVERAGE OIL PRICE, BALANCE OF PAYMENT, BALANCE OF PAYMENTS, BANK LENDING, BANK POLICY, BANKING SECTOR, BANKING SYSTEM, BASIS POINTS, BINDING CONSTRAINT, BOND ISSUANCE, BOND MARKET, BOND MARKETS, BOND YIELDS, BONDS, BUDGETING, BUFFER, BUFFERS, BUSINESS CONFIDENCE, BUSINESS CYCLES, CAPITAL ACCOUNT, CAPITAL ADEQUACY, CAPITAL FLOWS, CAPITAL GAINS, CAPITAL INFLOWS, CAPITAL INVESTMENT, CAPITAL MARKET, CAPITAL OUTFLOWS, CENTRAL BANK, CHECKS, COMMODITY PRICE, COMPARATIVE ANALYSIS, CONFIDENCE INDEX, CONFIDENCE INDEXES, CONSOLIDATION, CONSUMER CONFIDENCE, CONSUMER DEMAND, CONSUMER PRICE INDEX, CONSUMERS, CONSUMPTION GROWTH, CONTINGENT LIABILITIES, CORE INFLATION, CORPORATE PROFIT TAX, CORPORATE PROFITS, CREDIBILITY, CREDIT BOOM, CREDIT DEFAULT, CREDIT DEFAULT SWAPS, CREDIT EXPANSION, CREDIT GROWTH, CREDIT QUALITY, CREDIT RISKS, CURRENCY, CURRENCY BASKET, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, CURRENT ACCOUNT SURPLUS, CUSTOMS UNION, DEBT BURDEN, DEBT PAYMENTS, DEBT-SERVICING COSTS, DECLINE IN INVESTMENT, DEPOSIT, DEPOSITS, DEPRECIATION, DEPRESSED INVESTMENT, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DISPOSABLE INCOME, DIVIDENDS, DOMESTIC DEMAND, ECONOMIC CONCENTRATION, ECONOMIC COOPERATION, ECONOMIC DEVELOPMENTS, ECONOMIC EXPANSION, ECONOMIC GROWTH, ECONOMIC OUTLOOK, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC SLOWDOWN, ECONOMIC STRUCTURE, EMERGING ECONOMIES, EMERGING MARKETS, EQUIPMENT, EQUITY ISSUANCE, EXCHANGE RATE, EXCHANGE-RATE, EXPENDITURE, EXPENDITURES, EXPORT GROWTH, EXPORT PERFORMANCE, EXPORTERS, EXPORTS, EXPOSURE, EXTERNAL DEBT, EXTERNAL DEBT PAYMENTS, EXTERNAL DEMAND, EXTERNAL FACTORS, EXTERNAL FUNDING, FEDERAL BUDGET, FEDERAL BUDGET DEFICIT, FINANCIAL ASSETS, FINANCIAL INTERMEDIATION, FINANCIAL MARKETS, FINANCIAL SECTOR, FINANCIAL SYSTEM, FISCAL DEFICIT, FISCAL POLICY, FOOD PRICES, FOREIGN CURRENCIES, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, GDP, GLOBAL DEMAND, GLOBAL ECONOMY, GLOBAL MARKET, GLOBAL MARKETS, GLOBAL TRADE, GOVERNMENT BANKS, GOVERNMENT BUDGET, GROSS DOMESTIC PRODUCT, GROWTH POTENTIAL, GROWTH PROJECTIONS, GROWTH RATE, GROWTH RATES, HIGH INFLATION, HIGH-INCOME COUNTRIES, IMPLICIT GOVERNMENT GUARANTEE, IMPORT, IMPORT TARIFFS, IMPORTS, INCOME GROWTH, INDEBTEDNESS, INFLATION, INFLATION EXPECTATIONS, INFLATION RISK, INFLATION TARGETING, INTEREST PAYMENTS, INTEREST RATE, INTEREST RATES, INTEREST RATES ON LOANS, INTEREST-RATE, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL MARKETS, INVENTORIES, INVENTORY, INVESTING, INVESTMENT ACTIVITIES, INVESTMENT ACTIVITY, INVESTMENT DEMAND, INVESTMENT INCOME, INVESTMENT PROJECTS, INVESTMENT RATE, LABOR MARKET, LACK OF CONFIDENCE, LOAN, MARKET ACCESS, MARKET CONDITIONS, MARKET PARTICIPANTS, MARKET RATES, MATURITIES, MATURITY, MONETARY POLICY, MONEY-MARKET, MORTGAGE, MORTGAGE INTEREST, MORTGAGE INTEREST RATES, MORTGAGE LOANS, NATURAL RESOURCES, NET EXPORTS, NON-PERFORMING LOAN, NON-PERFORMING LOANS, NPL, OIL DEMAND, OIL PRICE, OIL PRICES, OIL REVENUE, OIL REVENUES, OIL SUPPLIES, OIL SUPPLY, OUTPUT GAP, OUTTURN, OUTTURNS, PENSIONS, PORTFOLIO, PORTFOLIO QUALITY, PORTFOLIOS, POSITIVE EFFECTS, POVERTY REDUCTION, PRICE VOLATILITY, PRIVATE BANKS, PRIVATE CONSUMPTION, PRIVATE CREDIT, PRODUCTIVITY, PRODUCTIVITY GROWTH, PUBLIC FINANCE, REAL GDP, REAL INCOME, REAL WAGE GROWTH, REMITTANCES, REPO, REPO RATE, RESERVE, RESERVE FUND, RESERVES, RETURNS, SAVINGS RATE, SOVEREIGN BOND, SPECULATIVE ATTACK, STATE BANKS, STOCK MARKETS, STOCKS, STRUCTURAL CHANGE, STRUCTURAL REFORMS, SUPPLY DISRUPTIONS, SUPPLY SIDE, TOTAL DEBT, TRADE BALANCE, TRADE PERFORMANCE, TRADE RELATIONS, TRADE SURPLUS, UNCERTAINTY, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, UPWARD PRESSURE, VALUE ADDED, WAGES, WEALTH, WITHDRAWAL