Kremlin’s Claims about Economic Growth Rest on Three Weak Reeds, Russian Experts Say

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(Paul Goble – Window on Eurasia – Staunton, June 29, 2017)

Independent Russian economists say that claims by Moscow officials concerning the supposed growth in Russia’s GDP do not correspond to reality, Russian experts say. Instead, they reflect some statistical sleight of hand, the low base from which any change is calculated, and even the anomalously cold weather of recent months.

Olga Solovyeva of Nezavisimaya gazeta has surveyed these experts who say that the increasing impoverishment of the population, the continuing decline in retail trade, and the collapse of housing sales should warn off anyone inclined to believe in this latest example of “Potemkin village” thinking (ng.ru/economics/2017-06-29/1_7018_rost.html).

First of all, independent experts in Moscow point out, Rosstat disaggregated production into goods production and retail sales. By doing that, it could point to higher production in the goods sector without that being overwhelmed as it has been in the past by declines in consumer spending and hence sales.

Second, they note, the Russian economy has declined so much over the last decade that the base against which any growth is to be measured is much smaller than before. As a result, any increase expressed in percentages – and that is Moscow’s favorite approach – may be large while the actual production underlying them may be quite small.

And third, Moscow was helped by the extremely cold temperatures in Europe over the last months. That allowed Russia to sell more oil and gas abroad than would otherwise be the case; and its earnings from such sales all added to GDP, even though there was no fundamental change in the nature of the economy.

Moreover, as several of the experts with whom Solovyeva spoke said, if the weather warms up in the coming year, Russia will sell less and GDP will fall by that amount. As one put it, next winter may be warmer than usual, and Russia’s GDP will thus fall as a result of that alone.

In short, the growth Moscow is so proud of is the product of these three things rather than any underlying improvement in the country’s economic situation, and that fact should be remembered whenever the Kremlin trumpets numbers that it hopes will suggest otherwise.

[Article also appeared at windowoneurasia2.blogspot.com/2017/06/kremlins-claims-about-economic-growth.html]