This year, Russia has taken over the rotating chair of the G-20 group of leading economies. Its theme is the need to start a new cycle of economic growth. Timely. Slow growth has been inescapable even for Russia’s perpetually-in-motion President Vladimir Putin. With the exception of the post-2008 global financial crisis recession (2009), 2012, at 3.4%, saw Russia’s slowest growth rate of the Putin era.
By the standards of fellow-Brics India and China, it looks positively sluggish. The slowdown in the EU hit Russia’s commodity exports, but domestic consumption and investment also slowed. A drought-damaged harvest was a further drag on growth. More broadly, the slowdown underlined the need for Russia to diversify its economy from its reliance on oil and gas. Prime Minister Dmitry Medvedev has unveiled a five-year plan–some habits die hard–to get growth back to 5% by 2018 through modernizing reforms such as improving the legal climate for business to improved access to financing.
He also had a reformist plan in 2009. The economy did not see anything like as much change as initially envisaged. Policy making moves slowly in the Kremlin. It may take a strong external shock to spur better success this time round. The World Economic Forum has suggested that could be a fall in oil prices working through to declining regional subsidies and cuts in social spending. High oil revenues, and Gazprom’s ability to keep its natural gas prices defying the gravity that has pulled them down elsewhere, have given the government a cushion of self-contentment. It is by no means assured to remain as plump.