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Economy in Brief

Russian Growth Moderates in 2005; Inflation Still Up in Double-Digits
by Carol Stone February 1, 2006

The State Committee of the Russian Federation reported GDP data today for the year 2005. Total GDP expanded 6.4% for the year as a whole. Assuming there are no meaningful revisions to the first three quarters of the year, the year-to-year growth for Q4 would be 7.0%, the same as for Q3, not seasonally adjusted. [The implied Q4 information is calculated by us, using DLX capabilities in Excel.]

For the year as a whole, growth slowed from 2004 in all major expenditure categories. For most, this downshift was quite modest. Indeed, private consumption remained on a firm growth path after picking up in 2004. In contrast, both exports and imports saw a sizable adjustment. Imports of goods and services had expanded 22.5% in 2004 and moderated to 16.2% in 2005. Exports had been up 11.9% in '04 and then grew only 5.6% last year. A cursory examination of the price deflator for exports suggests that accelerating prices, perhaps for oil, lifted nominal export growth, while export volume gains were much smaller, their weakest since 2001.

Prices in general seem still to be an issue in Russia. Inflation, again perhaps energy related, accelerated sharply in 2004, to nearly 20% from 13.2% in 2003. Last year saw a bit of moderation at a still-high rate. The acceleration is reflected in a price deflator for Russian exports, seen in the second graph. Deflators for consumption and capital formation don't show this significant increase, although they still run at 10-12% rates. Compared with its neighbors, this range of inflation is fairly high. The Ukraine and Kazakhstan experience occasional bouts of double-digit price increases, but most other surrounding industrial countries have much lower rates: Poland, Hungary, the Czech Republic, and so on. Russia continues then to grapple with structural difficulties that, despite its apparently healthy real growth, keep its overall economic performance in a rather precarious state.

(Bil.2003 Rubles)
2005 Annual Level % of Total Q4 Y/Y Implied Growth 2005 2004 2003 2005
Total GDP 15,101 100.0 7.0 6.4 7.2 8.2 4.7
Private Consumption 8,109 53.7 -- 11.1 11.6 6.0 8.5
Gov't Consumption 2,423 16.0 -- 1.8 2.1 0.6 2.6
Capital Formation 2,991 19.8 -- 10.5 11.3 11.5 2.8
Imports 4,488 29.7 -- 16.2 22.5 18.6 14.6
Exports 5,501 36.4 -- 5.6 11.9 12.4 10.3
Deflator (2003=100) 143.47 -- 25.7 19.7 19.9 13.2 15.5
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