RIA Novosti: European Commission Names Main Risks for Russian Economy

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BRUSSELS, November 4 (RIA Novosti) – The geopolitical tensions over the situation around Ukraine, declining oil prices combined with Russia’s high dependence on energy exports, a weakening ruble and high inflation are among the main risks for the Russian economy, said the European Commission’s (EC) forecast, published Tuesday.

“Economic growth in Russia had been on a declining trend for some time as the growth model based on the export of natural resources ran out of steam, diversification of the economy made only little progress and investment stalled,” the EC document stated.

“These trends are exacerbated by the fall-out from geopolitical tensions, including sanctions, which disrupt trade and financial flows, undermine confidence and take a heavy toll on investment and consumption.”

The pressure of the political tensions will affect the Russian economy in 2015. “A gradual recovery of the Russian economy may be expected only in 2016, albeit still below the growth rates observed in previous years, as structural bottlenecks are increasingly weighing on potential output growth.”

The exports from Russia “are expected to decelerate in 2014 and to pick up moderately in 2015 and 2016 in line with the anticipated recovery in main export markets and provided that geopolitical tensions ease in the course of 2015.

As for the inflation, EC sees it as remaining elevated in 2015 and gradually falling to 6 percent in 2016. The country’s GDP is expected to grow by 0.3 percent in 2014 and 2015, and by 1.2 percent in 2016.