Government Forecasts 4% GDP Growth, Slashes Loan Estimate

The economy could grow by about 4 percent annually in the next two years, even as the country tries to keep inflation low, the government press service said Sunday in a statement distributed to news agencies.

Prime Minister Vladimir Putin is scheduled to meet with his ministers to discuss macroeconomic and social issues on Monday, Interfax and RIA-Novosti reported, citing the press service.

The government’s “base scenario” for economic development foresees annual economic expansion of 3.5 percent to 4.2 percent in 2011 and 2012, the agencies reported. Industrial production should grow by 3.3 percent to 4.2 percent a year by 2013.

The announcement came after a Central Bank official said Friday that the regulator had slashed its forecast for loan growth this year and other economic data cast doubt on the durability of Russia's economic recovery.

Central Bank board member Mikhail Sukhov told Reuters that the bank had slashed its forecast for growth by around 10 percentage points, though he added that corporate loans grew by 0.9 percent in April from March — the first increase since November 2009.

The Central Bank sees loan growth as key to an economic recovery and previously forecast that loans would rise 15 percent this year. Sberbank, the country's largest lender, has said it expects its portfolio to increase by about 10 percent.

"A forecast of 5 percent growth or just above is reasonable," Sukhov said.

The government and the Central Bank pushed billions of dollars into Russia's banks in 2009 in a bid to revive credit growth, but banks remain cautious despite abundant liquidity and bullying by the country's leaders.

Speaking at an economic summit Friday, Putin again noted that Russian banks were not suffering from liquidity problems.

The ruble-denominated MICEX Index climbed 0.07 percent to 1,264.91 at the close on Friday, after falling as much as 2.1 percent in earlier trading. For the week, the benchmark index of 30 stocks retreated 6.4 percent.

Retail sales, once the driver of Russia's economic growth, rose 4.2 percent year on year while real disposable income grew 3.7 percent year on year, the State Statistics Service said.

The ruble ended a nervous week in a steep fall, losing ground on global risk aversion and weaker oil that prompted foreigners to ditch ruble assets, and dealers said further losses were possible this week.

The ruble had seen a sustained rally as investors pushed money back into riskier emerging market assets and the recovery of commodities like metals, oil and gas made mineral-rich Russia a relatively safe bet.

But the oil rally has slackened amid worries over the global recovery, and that increases risks both to Russia's own growth outlook and its budget planning — which largely depend on the dollar revenues the sector provides.

Moscow forecasts the economy to expand 4 percent this year. To date, that had been seen by many analysts as too conservative because it was based on oil prices averaging just $76 a barrel.

Spot prices for Urals crude were around $69 per barrel on Friday.

(Reuters, Bloomberg, MT)