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. Last Updated: 07/27/2016

Slow, Steady GDP Growth Forecast

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The economy probably slowed down in the first quarter to 4.9 percent from 9 percent in the same period last year but would no doubt slowly pick up speed over the rest of 2001, economists said Friday.

They also said gross domestic product was likely to grow at 3 percent to 5 percent this year in the years ahead if reforms pursued by President Vladimir Putin stay on track.

Putin has been praised for creating greater political stability and reforms aimed at cutting taxes. Officials from the International Monetary Fund, ending a visit to Moscow, were also said to be pleased with the current state of the economy.

"We maintain our 3 percent growth forecast for 2001 and remain happy with our outlook for sustained medium-term economic recovery," said Renaissance Capital economist Roland Nash after first-quarter data were given by the State Statistics Committee.

He said that the price of oil, a key export, was helping keep the economy afloat and was also encouraged by what he saw as a wider restructuring in the economy. He saw the fuel and energy sector, food processing, natural resources and metals as areas that were undergoing change and would help drive growth in the future.

"The slowdown is not excessive, and the important feature is that a range of firms are restructuring and adapting to the changing incentive environment provided by the economic and political stability afforded by President Putin and the weak, but strengthening real ruble," Nash added.

Some analysts have warned that Russia's economy will slow sharply this year as the competitive benefits of a ruble devaluation after the 1998 crisis wear off and the oil price sinks.

The economy expanded a record 8.3 percent last year, and the government has forecast 4 percent growth for 2001.

But Putin's economic adviser Andrei Illarionov has said 2001 growth may be only 2 percent to 3 percent and that the government would struggle to stay within a 14 percent to 16 percent inflation forecast.

However, Russia's representative to the IMF said after a visit by fund officials, which ended Friday, that the economy had been given the seal of approval by the visiting delegation.

"There are no reasons for pessimistic forecasts," said Alexander Mozhin, Russia's fund envoy. Another source close to the talks between Russian officials and the IMF team said the delegation had been satisfied by its visit.

"Everything is so good right now in the Russian economy that it's even becoming boring," the source said.

Some analysts have also been optimistic on Russia's outlook.

Nomura said in a research note that pessimistic forecasts were overdone and pointed to a statement by Economic Development and Trade Minister German Gref of 4.9 percent GDP growth in the first four months.

"The more optimistic scenario sees firm oil prices for the balance of the year, decent prospects for investment, some ongoing benefit from the 1998 devaluation and the beginnings of a more sensible policy of ruble management," it said.

"For all these reasons, we are raising our 2001 GDP growth forecast to 5 percent from 4 percent and see a similar pace next year," it added.

Peter Boone, an economist at Brunswick UBS Warburg, said the first-quarter GDP figure was more or less what he expected.