Russia can expect only limited GDP growth

Significance

First-quarter GDP data show that the economy is stabilising after two years of recession. Obstacles to continued growth emerged before either the Ukraine crisis or the fall in global prices, and much of the thinking in policy-making circles is about how to address them.

Impacts

• The austerity regime may be softened later this year to allow spending ahead of the March 2018 presidential election.
• If fiscal discipline is broadly maintained, military spending in real terms will be held below 2015 levels for at least two years.
• The key interest rate will follow the rate of inflation down, easing the business community's concern about the cost of finance.
• Continued slow growth will intensify competition for resources among elite groups, creating possible sources of political instability.