Newspaper article International Herald Tribune

Slow Revival in Russia despite High Oil Prices

Newspaper article International Herald Tribune

Slow Revival in Russia despite High Oil Prices

Article excerpt

The country is rebounding from the global recession more slowly than other developing countries despite historically high oil prices, a World Bank report found.

Russia is rebounding from the global recession more slowly than other developing countries despite high oil prices, according to a report Wednesday by the World Bank that hints at problems awaiting Vladimir V. Putin as he assumes his third term as president.

A number of factors are weakening the Russian economy, the World Bank said: The aging population, unproductive workers, and business executives who are reluctant to invest over the long term, fearful of risk in general but with specific concerns about Russia.

The report called low capital investment a particular concern. Russia is spending on factory equipment, trucks and airplanes at a level typical of more developed economies like Germany.

High oil prices have obscured these economic vulnerabilities. Russia had a budget surplus equivalent to 0.8 percent of gross domestic product last year. But the structural problems pose a challenge for Mr. Putin, who will be inaugurated to a new six-year term as president in May.

"On a closer examination, the country's economic situation reveals a number of weaknesses," Kaspar Richter, the bank's chief economist for Russia, said about the report, a quarterly analysis of the Russian economy.

The bank estimated that Russian economic growth would slow from 4.3 percent last year to 3.5 percent this year, before picking up slightly in 2013. For comparison, other developing economies grew at a pace of 5.5 percent on average last year, according to the report.

The slower growth in Russia is even more remarkable in light of expectations economists had for the country just a few years ago. Since the economic crisis, Russia's long-term trajectory has departed from expectations far more starkly than countries it is often compared with, like China, India and Brazil. …

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