Russia: World Bank downgrades GDP forecast for 2011
Overview:
In its latest Economic Report the World Bank has downgraded the outlook for growth in Russia. Growth is still expected to be respectable. Many other economic indicators remain favourable: inflation is falling and the current account is in surplus. However, Russia remains vulnerable to external shocks because of its large non-oil fiscal deficit. High oil prices mean that the nominal fiscal deficit will largely disappear this year. However, the non-oil fiscal deficit remains a huge 11% of GDP. Russia does not have any financing or debt sustainability problems. However, the non-oil fiscal deficit is targeted to fall only slowly over the next couple of years. Hence, its fiscal position will remain highly conditional on the outlook for oil prices which could deteriorate if the global economy slows more than expected.