Outlook for global economic growth, global trade and the Russian economy

The rise of protectionism is a significant source of risk for global economic growth, Russia’s Economic Development Ministry said in its Forecast for the Social and Economic Development of the Russian Federation to 2036. While already imposed trade restrictions are not yet having a marked negative impact on growth, further escalation of trade wars will lead to the slowdown of global investment demand due to increased uncertainty, and disrupt established value chains and adversely affect productivity because of barriers to the spread of new technologies.

The slowdown of the Chinese economy in the medium term will have a negative impact on the base metals and coal markets, where China is the biggest consumer. On the oil market, changes in supply will play the key role in determining prices in the next few years.

Against this backdrop and taking into account macroeconomic policy, Russian GDP is forecasted to grow by 1.3% in 2019. The slowdown in economic growth is attributed in part to the fact that the active phase of implementation of Russia’s national projects has shifted closer to the middle of the year while the tax burden already increased as of January 1, 2019; as well as to the Bank of Russia’s moderately tight monetary policy, aimed at controlling inflation expectations.

However, the acceleration of inflation and slowdown of economic growth are expected to be temporary. The package of structural changes proposed by the Russian government should set the stage for putting economic growth on a higher trajectory. The Economic Development Ministry expects economic growth to gradually accelerate to 2.0% in 2020 and to more than 3.0% starting in 2021. And the structure of GDP is expected to shift significantly toward an increase in the contribution of investment demand.

Outlook for Russian exports and imports to 2021Baseline scenario of Forecast for the Social and Economic Development of the Russian Federation to 2036.

Russia’s foreign trade turnover grew by 17% to $688 billion in 2018, driven by a 35% surge in exports of fuel and energy commodities to $286.7 billion.

The baseline scenario projects a gradual recovery in production of investment demand goods and growth of exports to $444.5 billion by 2021. Government contracts will continue to play an important role, which will have a positive impact on the development of the engineering sector. Export sectors such as the fuel and energy sector, metals and chemical production will maintain a strong position. The implementation of government infrastructure projects will support demand for construction sector services. The food industry will continue to grow rapidly given the ongoing implementation of the import substitution program and development of domestic production capacity.

Growth is also expected in light industry.

The structure of industrial production is not expected to change significantly in the medium term.

Imports are expected to grow by 25% to $298 billion by 2021, primarily driven by machinery, equipment and vehicles.