Launch of a World Bank Report.
Russia’s economy lost steam in 2013. Growth slowed to 1.4 percent in the first half (H1) of 2013, compared to 4.5 percent in H1 2012.
The World Bank's Russia Economic Report examines several aspects of the economic slowdown. It shows that the slowdown was largely the result of weaker demand, which was due to a combination of external and domestic factors, some of which are cyclical and others structural. A large part of the cyclical component is related to Russia’s high dependence on oil and gas exports and with it, its exposure to commodity price volatility. The structural challenges to the Russian economy and its growth, such as non-competitive sectors and markets, are another important factor to consider in the economic slowdown. In fact, structural issues recently moved to the forefront of policy discussions as the economy seem to operate close to its current capacity limit. This has important implications for our outlook, which is presented in the report.
The special focus note of this report discusses the link between growth patterns in Russia, firm survival and diversification in manufacturing and will also highlight the impact of limited competition as a structural constraint. It has three main findings are: First, Russian manufacturing output growth is characterized by a higher volatility than other comparator countries. Second, this volatility is mostly driven by more numerous, deeper and longer slumps and is mostly associated with aggregate slumps that have yearly effects. When the Russian economy slumps or surges, few sectors can escape the gravity of the downward or upward pull. Third, while the economic surges increase the probability that productive firms remain in the market, the same is not true of economic slumps—older firms, not necessarily more productive ones, are more likely to survive the downturn. Furthermore, in sectors in which competition is less fierce, firms have a higher likelihood of weathering a slump.
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