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. Last Updated: 07/27/2016

Premier: Economy Posts Slight Growth

Preliminary figures for the first nine months of 1997 show Russia's economy is steering a steady course toward slight but psychologically important growth by the end of the year, analysts said Wednesday.


In a speech to the opposition-dominated parliament, Prime Minister Viktor Chernomyrdin said the economy grew by 0.2 percent in the first nine months of the year against the same period a year ago.


Official figures on gross domestic product, the broadest measure of a country's economic health, have yet to be released by the State Statistics Committee.


"The important news is that GDP out-turn for the calendar year 1997 now looks likely to be a plus," said United City Bank director of research Christopher Granville, noting end-of-year figures were likely to show 0.5 percent growth in GDP over last year.


"In real terms there's not a whole lot of difference, but in psychological terms it is very important."


Although year-on-year change in GDP has remained mostly flat since 0.1 percent year-on-year growth in January and 0.9 percent growth in February sparked hopes of economic growth, Russia has seen sharp monthly gains in GDP in recent months.


The 0.2 percent year-on-year growth for the first three quarters of the year, if confirmed, offers yet more evidence of stabilization and possible growth by the end of the year.


Al Breach, an economist at the Russian European Center for Economic Policy, also said GDP was likely to show 0.5 percent growth by the end of the year, while Merrill Lynch's director of emerging markets Dan Lubash saw it between 0.2 and 0.4 percent.


But despite the upbeat outlook for the short term, analysts said economic health in the medium term would depend on the government's ability to drive through a sound budget and controversial tax reforms for the 1998 fiscal year.


"Sustained medium-term growth will depend on fundamental fiscal reforms, which is what the government is attempting in the tax reforms and a realistic [1998] budget with a tight deficit," said Granville.


Chernomyrdin put the deficit at 66 trillion rubles ($11.3 billion).


The government faces a tough battle with the parliament over the 1998 budget and the draft reform tax code, which opposed sharp cuts in 1997 budget spending brought on by disastrously low tax collection rates and which wants more social spending.


Chernomyrdin also said another economic indicator, net grain output, would rise sharply to 84 million to 85 million metric tons this year, according to preliminary estimates.


"The net harvest according to preliminary estimates will be 84 million to 85 million tons -- this is 27 to 28 percent more than over the past two years," he told the Duma.


Chernomyrdin's estimate is higher than previous official estimates of around 80 million tons.


Last year's poor harvest was officially 69.3 million tons. Net production in 1995 was a disastrous 63.4 million tons after drought damaged the crop. Those two years were among the worst on record for Russia in three decades.


Chernomyrdin said 88.9 million tons of grain had been threshed as of the beginning of October. The amount was 31.5 percent above year-ago levels. The harvest is not yet over.


Independent analysts have echoed the brighter prospects for Russian grain output this year.


But they have said the crop is of lower quality, which could spur exports of feed wheat and imports of wheat for human consumption.


Kazakhstan and Ukraine are traditional suppliers to Russia.