Russian Economy Primed For Sharp Upswing In 2014: Danske Bank

Russia’s gross domestic product slowed sharply in 2013, but economists are optimistic that the Russian economy will double its speed in 2014, according to Danske Bank research released Wednesday.

Growth from January to November in 2013 averaged 1.3 percent, due largely to domestic factors. Fixed investments fell 0.8 percent in the same time period.

“Although the current situation is often defined as ‘comfortable stagnation,’ we see it differently due to the low unemployment rate,” Danske economist Vladimir Miklashevsky wrote in the report.

Unemployment has remained low in Russia, at 5.4 percent in November, which has supported private consumption. But weak demographics are curbing the labor force and long-term economic growth.

Danske expects 2013 Russian GDP grew by 1.5 percent and expects it to accelerate to 2.6 percent in 2014 due to private consumption growth, the Sochi Olympics, lower inflation, fixed investment expansion, high oil prices, moderate consumer lending growth, residential construction, a downward trend in inflation and improvements in U.S. and European economies.

Falling public investments and those by state-owned companies caused the slowdown in fixed investments in 2013. Shrinking corporate profits also caused private investments to fall. But Danske expects the low base, frozen tariffs for industries and monetary easing to increase fixed investment growth in 2014 to above 3 percent.

Russia’s Micex stock exchange lost 0.7 percent in 2013.

Uncertainty abour U.S. monetary policy, as well falling prices for energy and metals exports and rising U.S. oil production will remain downside risks for Russian stocks in 2014.

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(Note: Winter Red Square photo by Shutterstock.com.)