GDP GROWTH ON DEMAND….
The May Day-Victory holiday season, it appears, has not put Russia’s head of state in a festive mood. Putin this week once again evinced annoyance over the “insufficiently ambitious” economic plan put forward by his cabinet in early April, which forecast 4-4.5 percent yearly growth over the next four to five years. Almost a month had passed and he still had not seen revised figures for “the main parameters of the country’s development,” Putin complained, adding icily that he hoped those ministers who were on vacation–a reference to Prime Minister Mikhail Kasyanov, Deputy Prime Minister Viktor Khristenko, Trade and Economic Development Minister German Gref and Finance Minister Aleksei Kudrin–would “in the nearest future undertake with new force to resolve those tasks before them.”
Kudrin and Gref had already promised to revise the growth projections upward, but failed to promise that the gross domestic product would expand by much more than 5 percent, annualized, at least for the time being. Likewise, other high-level government officials grumbled–off the record, of course–that the 8-percent-plus yearly growth rate sought by Putin and his gadfly economic adviser, Andrei Illarionov, could not be simply ordered up by presidential diktat.
Putin’s ongoing dyspepsia over the GDP contrasted with the continuing gurgles of satisfaction emanating from the West over the performance of the Russian economy. Fitch Ratings, the international rating agency, upgraded Russia’s long-term ratings from “stable” to “positive,” declaring that it expected Putin’s leadership would ensure that the Russian authorities continued “to introduce and implement structural reforms that are vital to raise living standards and diversify the economy.” Likewise, the United Nations Economic Commission for Europe (UNECE) issued a report calling Russia “an engine of growth” for the Commonwealth of Independent States. The report praised the Putin administration for introducing legislative and regulatory reforms last year that were “[p]robably more sweeping and comprehensive… than in any other year since the start of economic transformation” and were “aimed at fostering entrepreneurship and developing the infrastructure of the market economy in Russia.”
Still, the UNECE report did warn about the pitfalls of Russia’s dependence on oil, saying that additional and deeper structural reforms were need to transform its economy into a “knowledge-based” rather than commodity-based one. And a new set of numbers on industrial growth underscored the grounds for Putin’s nervousness. The CIS’s statistical committee reported that industry in Russia grew just 2.6 percent in the first quarter of this year over the same period in 2001, slower than in Armenia, Kazakhstan, Azerbaijan, Moldova, Tajikistan and Ukraine, and beating out only Belarus, Georgia and Kyrgyzstan.