Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Ministry: Growth to Slow in H2

Economic growth is likely to slow in the second half of 2004, hurt by a recent banking crisis and an expected fall in prices for crude oil exports, the Economic Development and Trade Ministry said Wednesday.

The ministry said in a monthly report that it expected economic expansion to slow to 6.5 percent in the last six months of this year after growth of 7.4 percent in the first half. The economy grew 7.5 percent in the first six months of 2003, Interfax reported, citing the ministry.

"A number of negative factors, which were not fully felt in the first half of the year, may have an impact in the second half of the year," the report said.

It mentioned the threat of quickening inflation and a recent mini-crisis in the banking industry that took place between May and July, among reasons for the slowdown.

"It did not have a noticeable impact on macroeconomic indicators but led to a slowdown in crediting the economy that may put the brakes on growth rates in retail and construction," the report said.

The report also said the government was likely to rein in its spending in the second half of the year, and forecast that prices for the country's key export, oil, would ease from their current record highs in the second half.

Urals, the main export blend of crude oil, rose to $38.08 per barrel Wednesday, from $27.00 on Jan. 2. Revenue from oil and gas are 57 percent of total exports.

The second half of 2003 is also a higher base with which to compare the 2004 figures than the first half of that year.

But the ministry said it has not changed its annual GDP growth figure of 6.9 percent.

In the first seven months of the year, gross domestic product rose 7.4 percent.

July showed growth of 7 percent -- higher than the 6.4 percent registered in July last year, but lower than the 7.8 percent growth this June.

Among reasons for the slowdown, the ministry mentioned growing uncertainly on the stock market caused by the troubles of Yukos, which is facing back tax bills running up to $7 billion and says it may go bankrupt.

"The start of a slowdown trend is mainly due to a slowdown of growth in the industry and construction and investment," the ministry said in the report.

"Higher growth rates in agriculture and favorable trends on the world market have failed to compensate for this negative tendency."

The ministry said the strengthening of the ruble rate did not affect the economy.

"Limitations connected with low non-price competitiveness of domestically produced goods, the fact that state purchases are lagging behind [the plan] ... are most likely reasons," it said.

(Reuters, Bloomberg)