The Bank of Finland Institute for Economies in Transition (BOFIT) today released its semi-annual forecasts for the Russian and Chinese economies.

GDP growth in Russia should slow to around 1.5 % annually in coming years. With the hike in value-added taxes and a mild pick-up in the inflation rate impeding growth in household consumption, especially this year, 2019 growth is already expected to be lower than in 2018. The launch of state investment projects in 2020 and 2021 should slightly boost the pace of economic growth, particularly in 2020. There are no signs of an across-the-board recovery in fixed investment, however. The state’s ever-increasing role in the economy and low enthusiasm for market-based reform also depress Russia’s growth prospects in the medium term.

Economic growth in China, which witnessed a slowdown last year, continued to deteriorate in the early months of this year. Although the government has responded with measures to support growth, an already lax fiscal stance and extremely high debt-to-GDP ratio highlight the limits to debt-driven stimulus policies. Adding to the mix, the trade war between China and the United States has exacerbated economic uncertainty. Business-cycle weakness is accompanied by structural factors that depress the growth such as demographic shifts and the government’s failure to move ahead with economic reforms. While China’s economic growth is expected to continue to slow during 2019–2021, it will still outpace growth of the global economy. The risk of a sudden slump of growth has increased significantly. Unreliable official GDP data complicate assessment of China’s true economic conditions.

BOFIT forecasts are available online.
https://www.bofit.fi/en/monitoring/forecasts-for-Russia-and-China/

For further information:

Laura Solanko, senior adviser, +358 9 183 2291 / laura.solanko(at)bof.fi (Russia)
Juuso Kaaresvirta, senior economist, +358 9 183 2107 / juuso.kaaresvirta(at)bof.fi (China)
Iikka Korhonen, BOFIT head, +358 9 183 2272 / iikka.korhonen(at)bof.fi (Russia and China).

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