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Government eyes way out of recession

PM Dmitry Medvedev can hope for the best, but economic outlooks seem bleak.

But experts leave the Russian economy with few chances for a quick recovery.

Russian Minister of Economic Development Aleksey Ulyukaev believes economic recovery is in the pipeline and that 2016 will see a two percent growth. “The situation with the Russian economy is starting to improve”, he said in late July, Vesti.ru reports.

The statement came as figures from the Russian Statistics Service show that the country’s economy in the first half of 2015 contracted with 4,6 percent. Minister Ulyukaev believes that the negative growth will turn positive in the second half of the year and that the total recession in 2015 will be reduced to 2,8 percent.

Those estimates, however, are disputed by experts, some of whom believe the Russian GDP will have negative growth not only in 2015, but also in 2016 and that stagnation will prevail for several more years.

According to Natalia Orlova, Chief Economist at the Alfa Bank, the Russian economy with its current setup will not be able to reach any significant growth rate, only a maximum of 1,5-2 percent, an opinion published in newspaper Vedomosti reads. Investments are too low and the increasingly shrinking Russian work force is a challenge, she argues.

Figures from the Russian State Statistical Service Rosstat show negative growth in the country’s industrial production. In June, output was 4,8 percent lower than the same month 2014 and figures for the first half 2015 show a year-on-year 2,7 percent decline.

According to research by the Gaidar Institute, presented by newspaper Nezavisimaya Gazeta, there are no imminent signs of recovery in the Russian industry and the number of job cuts in the sector is on the increase.

The trend is the same in Northwest Russia. As illustrated by figures from Patchwork Barents, the regional data portal, industrial production in most parts of Barents Russia is experiencing a downturn. In 2014, only the Nenets Autonomous Okrug and the Komi Republic made it into the plus.

As the economy slows, so do also the salaries. The drop in people’s incomes are now the highest since President Putin came to power in year 2000. The Russian research center CMASF now anticipates a 11 percent decline in salaries in 2015, NG.ru reports.

In the Barents Region, the salary decline started already in 2014. According to Patchwork Barents data, the drop in salaries exceeded ten percent in all the regions; Murmansk, Arkhangelsk, Karelia, Komi and Nenets.