Russia Economic Report, No. 30, September 2013 : Structural Challenges to Growth Become Binding
Russia's economy lost steam in 2013. Growth slowed to 1.4 percent in the first half (H1) of 2013, compared to 4.5 percent in H1 2012. This report examines in its first part several aspects of the economic slowdown. It shows that the slowdown w...
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| Format: | Economic Updates and Modeling |
| Language: | English en_US |
| Published: |
Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2013/09/18362435/structural-challenges-growth-binding http://hdl.handle.net/10986/16691 |
| Summary: | Russia's economy lost steam in
2013. Growth slowed to 1.4 percent in the first half (H1) of
2013, compared to 4.5 percent in H1 2012. This report
examines in its first part several aspects of the economic
slowdown. It shows that the slowdown was largely the result
of weaker demand, which was due to a combination of external
and domestic factors, some of which are cyclical and others
structural. The structural challenges to the Russian economy
and its growth, such as non-competitive sectors and markets,
are another important factor to consider in the economic
slowdown. The special focus note in part three of this
report discusses the link between growth patterns in Russia,
firm survival and diversification in manufacturing and will
also highlight the impact of limited competition as a
structural constraint. This note looks at the role of growth
volatility as a possible explanation. It examines the role
of surges and slumps in manufacturing output and its
microeconomic implications in the dynamics of emergence and
sustainability of nascent economic activities. The dynamics
of the industrial output of the economy as whole, between
1993 and 2009, are the focus of this study. This note
examines the downturns that magnify and accelerate the
cleansing effects to the economy in forcing inefficient
firms to exit, as well as the upturns that set the
foundations of economic diversification by giving new
economic activities the opportunity to emerge. This note has
three main findings. First, Russian manufacturing output
growth is characterized by a higher volatility than other
comparator countries. Second, this volatility is mostly
driven by more numerous, deeper and longer slumps and is
mostly associated with aggregate slumps that have yearly
effects. Third, while the economic surges increase the
probability that productive firms remain in the market, the
same is not true of economic slumps-older firms, not
necessarily more productive ones, are more likely to survive
the downturn. Furthermore, in sectors in which competition
is less fierce, firms have a higher likelihood of weathering
a slump. |
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