The Bank of Finland Institute for Economies in Transition (BOFIT) today released its semi-annual forecasts for the Russian and Chinese economies.
The forecast for Russia sees the country's GDP continuing to revive, increasing by nearly 2 % this year. If the oil price remains near its current levels, growth will slow to around 1.5 % p.a. in 2019 and 2020. While growth in Russia's imports remains fairly brisk, the recovery in imports this year is expected to slow notably from last year's strong rebound and a bit further thereafter. Growth of the economy will remain relatively slow as proper reforms are not in sight − reforms that, alongside adjusting state spending, would concentrate more on measures that improve the economy's ability to generate income and grow.
The pace of economic growth in China accelerated last year on an upswing in the business cycle and government stimulus policies. Official figures show GDP grew last year by 6.9 %. Our forecast outlook, however, is more pessimistic than previously as market reforms have been left undone and debt levels continue to rise. Instead, the role of the party in the economy has been amplified. In contrast to our previous forecast, high growth targets continue to dictate economic policy and as a result, we have slightly boosted our GDP forecast for this year, putting it on par with China's official 6.5 % GDP growth target. Going forward, as imbalances in the economy continue to grow, high growth fuelled by debt will become increasingly unsustainable. Thus, we expect growth to slow to a more sustainable level around 5 % by 2020. Several sources of uncertainty from both domestic and international markets cloud China's economic outlook, and downside risks have increased from our previous forecast.
BOFIT forecasts are available online:
For further information:
Vesa Korhonen, senior economist, +358 9 183 3440 / vesa.korhonen(at)bof.fi (Russia)
Riikka Nuutilainen, senior economist, +358 9 183 2518 / riikka.nuutilainen(at)bof.fi (China)
Iikka Korhonen, BOFIT head, +358 9 183 2272 / iikka.korhonen(at)bof.fi (Russia and China).