Growth to Return to Russia in 2017

According to comments made by the Russian Prime Minister Dimitry Medvedev in an interview on Saturday, Russia’s economy will be in growth phase at the start of 2017.

"We assume that at the end of the year these negative trends, which have been developing in our economy over the past two-three years, will exhaust themselves owing to the measures taken by the government and the general improvement of the situation. And already at the beginning of next year, we will reach relatively small parameters of economic growth, that is to say the GDP growth," Medvedev told Russia's Channel One.

In 2014 the Russian economy took a beating when its ruble fell by almost 50% against its US counterpart surrounded by the global slump in oil prices and the Western economic sanctions against Russia that resulted from the Ukrainian crisis. The restrictions included blacklisting Russian officials, tightening restrictions on state banks and corporations and effectively cutting off the country from Western debt markets. The Russian Federal Statistics Service Rosstat also revealed that there was also a 3.7% drop in Russia’s GDP in 2015.

There was swift increase in Oil prices last week after members of the Organization of the Petroleum Exporting Counties (OPEC) reached an agreement for a substantial production freeze in Algeria. The OPEC could further extend an invitation to Russia to join in on the production freeze later this year. The 14-member producer group is expected to finalize the deal at its next formal meeting in Vienna November 30.

The Russian central bank anticipates the return of growth to positive territory in the latter half of 2016, paving the way for a slow but steady recovery next year. However, central bank chief Elvira Nabiullina stated that Russia’s old model of economic growth has run its course, necessitating a change in direction for the Eurasian country.

“The old model of economic growth has exhausted itself. The new model should be based on investment,” said Nabiullina.

The Russian government expects GDP to expand 0.8% in 2017. According to a Reuters poll, inflation will decline to just over 6% by the end of the year as the central bank keeps a tight lid on monetary policy. However, the central bank is unlikely to achieve its 4% inflation target next year.