Executive Search in Russia – 2020 Outlook

Global Slowdown Dampens Russian Outlook

After a weak performance in the first half of 2019, economic growth in Russia picked up in the third quarter at 1.7%, helped by monetary easing, faster public spending and some one-off effects. Consequently, our 2019 forecast has been revised upwards to 1.2% from 1%.

Globally, growth has weakened substantially in 2019, reflecting a broad-based slowdown in industrial activity and global trade. Slowing external demand and the OPEC+ agreement weighed on Russia’s exports performance. Crude oil prices fell 14% in the first nine months, reflecting a downturn in the world economy.

Domestically, relatively tight monetary policy in the first half of 2019, weak real disposable-income dynamics due to higher inflation on the back of a VAT rate hike, and a slow start in the implementation of national projects dampened growth in 2019. A decline in the labor force and in the number of employed people, due to population aging, continues to be a drag and has not yet been compensated by the recently increased retirement age.

Growth projected at 1.6% to 1.8% in 2020-2021

Growth in Russia is expected to be 1.2% in 2019; 1.6% in 2020; and 1.8% in 2021. A less restrictive monetary policy and increased spending on national projects is expected to help foster growth.

The moderate poverty rate is expected to continue to decline in 2019 and through 2021, although vulnerability needs to be monitored. Increasing the existing means-test programs and expanding their reach would help to reach the goal of halving poverty by 2024.

Risks to the growth forecast

Key risks to the growth forecast include a weaker global economy, elevated trade tensions, and domestic factors. External adverse shocks could spill over into Russia through trade, financial, and commodity market channels. Russia also remains exposed to the possibility of additional economic sanctions, which may further dampen domestic and foreign private investment.

Investment growth relies on the successful and efficient implementation of government infrastructure investment initiatives. Rapid expansion in household credit has triggered a regulatory response, but more measures may be required to mitigate risks to financial stability from the sector.

Export diversification FDI, and financing sources in the spotlight

Russia’s export diversification has been progressing, but only slowly. Driven largely by higher oil prices, energy accounted for 65% of total exports in 2018 compared to 59% the previous year. Compared to other regional oil exporters, Russia has also seen fewer new export lines in the past four years.

New trade agreements within the Eurasian Economic Union (EAEU), such as with Serbia, Singapore and Iran, could expand Russia’s export opportunities.


For information contact Natalia Prokhorova at Cornerstone Moscow