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Russia economy puts on speed

Growth in the first four months of 2017 higher than expected

An employee counts Russian ruble banknotes at a small private shop selling home appliances in Krasnoyarsk December 26, 2014. REUTERS/Ilya Naymushin

Russian President Putin met with Russian Prime Minister Medvedev on 19th May 2017, the subject of their discussion being the state of the Russian economy.

Medvedev was able to report to Putin that the pace of Russia’s economic recovery is starting to accelerate.  GDP is believed to have grown by 0.5% since the start of the year whilst industrial production grew 0.7%.

Growth is expected to accelerate further over the coming months, with forecasts for the overall rate of growth this year extending from the IMF’s 1.4% all the way to 2% forecast by some members of the government.

The key factor holding back the speed of the recovery remains Russia’s high real interest rates, still by a considerable margin the highest of any G20 economy.  With inflation now running at the Central Bank’s target of 4% there is finally scope to reduce interest rates.  However the Central Bank is saying it will only do so gradually.

As interest rates decline growth should nonetheless start to pick up, with Medvedev already claiming that investment in the economy is finally increasing, which if true should pave the way for faster growth in the future.

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