RUSSIA REPORTS SKY-HIGH ECONOMIC GROWTH…

On June 30 Goskomstat reported that Russia’s GDP grew by a stunning 8.4 percent during the first quarter of 2000. (Sotsial’no Ekonomicheskoye Polozhenie Rossii, June 2000). This is the highest rate of quarterly growth Russia has reported since the collapse of the Soviet Union, and suggests that the economy continues to recover briskly from the effects of the August 1998 financial collapse. It is generally recognized, however, that Russia’s strong growth is due to external factors–such as the weak ruble and high prices for Russian exports–which will not last forever.

Although quite high by international standards, Russia’s 8.4 percent first quarter growth represents a continuation of a trend which took hold in the third quarter of last year. GDP was reported to have grown 6.7 percent then, and by 7.3 percent in the fourth quarter. The sectoral components of Russia’s first-quarter GDP growth were quite similar to the fourth-quarter pattern: In both quarters, value added produced by industry grew by 11 percent, while value added in the construction and transport sectors grew 9-10 percent. While the growth in value added contributed by agriculture fell from 6 percent in the fourth quarter of 1999 to 1 percent in the first quarter of this year, this was more than offset by faster growth in value added produced by domestic and foreign trade, which rose from 7 percent to 12 percent. These figures indicate that Russia’s economic expansion is now more balanced than it was in 1999, when strong growth in industry was offset by sharp declines in trade and other services.

Demand-side data showed that all the end uses of GDP grew sharply during the first quarter of 2000. Consumption was reported up 8 percent, with strong (9 percent) growth in personal consumption moderated by only a slight (1 percent) increase in government consumption. Fixed investment was up 6 percent, though a sharp decline in inventories slowed the growth of overall investment spending. Meanwhile Russia’s trade balance more than doubled, rising from US$6.0 billion in the first quarter of 1999 to US$13.7 billion in the first quarter of this year. These figures suggest that Russia’s growth was fueled by personal consumption and net exports, while investment spending and public consumption grew more slowly.

…BUT FOR HOW LONG?