HSE experts declared the fall of the Russian economy below the bottom


About the recovery of economic activity in Russia so far, in January-June 2016 the country has suffered a small correction, and the present recession, experts warn of the Institute “development Center” Higher school of Economics (HSE). In their report it is noted that the compression process of the economy was a “broad front”, and affects all sectors (except for wholesale trade), and as a result the economy is not just punched achieved previously, “bottom”, but went below it.

“He completed only the first, the most acute phase of adjustment of the economy to the “new normal” economy again began to contract, breaking the “bottom”. And GDP, which characterizes the production of the economy as a whole, struck the “bottom” in the first quarter of 2016, and in the second quarter, according to our estimates, was 1.4% below the “bottom” and 5.5% below average in 2014″, — the report says the HSE.

The record drop, according to experts, was the construction, the volume of which decreased over the six months by 10%. As a result, in the second quarter of 2016 the volume of production in this sector fell below the low of the 2009 recession and fell to the level of the end of 2006. In comparison with the average level of 2014, construction volumes decreased by 15%.

Industrial production for the six months decreased by 0.1%. HSE experts stress that improving the competitiveness of Russian goods due to devaluation of the ruble could not compensate for domestic enterprises losses from the reduction in domestic demand.

“The demand has been almost continuously declining since the beginning of the crisis, and in the first half even accelerated the decline, falling for two quarters by 3.7%. This implies that economic agents before the crisis, and did not notice until the notice”, — stated in the report.

Earlier today the experts of Markit reported a new drop in the purchasing managers ‘ index (PMI) in the manufacturing sector, dropping from 51.5 points in June 2016 to 49.5 points in July. The main reason for the decline in business activity as weak demand for Russian goods.

“Worsening demand conditions continued to exert pressure on economic performance of Russian producers in July. Head the index again slipped below the critical level of 50.0 points decline in total new orders. This reduction led to the weakening of output growth and decline of jobs across the sector,” said Markit economist at IHS Samuel Agassi.

In a report published today by the HSE highlighted a reduction of retail turnover for January—June 2016 decreased by 3.1%. Relative to the average level of 2014, retail turnover fell by 15%, approaching the levels of 2008.

“In these circumstances, we do not expect the resumption of sustainable economic growth in the near future”, — emphasized in the report of the HSE. According to experts, at the end of 2016, Russia’s GDP could shrink by 1.5% (what is much worse than the may forecast of economic development for this year”), and in subsequent years, the recession may last (“albeit at a slower pace”).

Previously, the Ministry reported that in the first half of 2016, Russia’s GDP with each passing month fell more slowly, and in June the seasonally adjusted decline in GDP “almost stopped.” In just the first six months of 2016, Russia’s GDP decreased by 0.9%.

Another threat to the economy remains the reduction of revenues from falling oil prices. In the first half of 2016 to cover the Federal budget deficit the government had to use the 780 billion rubles from the Reserve Fund, by the end of the year the Fund, according to the HSE, can be fully exhausted.

“A large loss of income threatens the depletion of the Reserve Fund in 2016 and the need this year to use the resources of the national welfare Fund to Finance the budget deficit. Given the shortfall of oil revenues, we believe that the sequester will not be able to restrict the previously announced 500 billion rubles,” — warn the authors of the HSE report.

New fall of world prices for oil from-for growth of reserves and production in the United States, according to experts from the HSE, could lead to the fact that the dollar against the Russian currency will rise to 70 rubles./$ or even higher. However, analysts say that the decline in demand of Russians for imported goods will not allow the dollar to “roam”, so exceeding the annual maxima, most likely, will not happen. Recall that in January 2016 the dollar on the Moscow stock exchange rose to RUB 85,99