Alfa-Bank Chief Economist Answers Media Questions
OREANDA-NEWS. September 02, 2014. A press conference of Alfa-Bank Chief Economist, Head of Alfa-Bank Macro Insights Natalia Orlova was held in Krasnodar to answer media questions regarding the prospective development of Russia’s macroeconomic indicators.
Natalia Orlova stated a slowdown in economic growth rates but said against that backdrop a rather strong consumption trend prevailed and its rise continued alongside a downward trend in investment. The Alfa-Bank Chief Economist said also, "The growth problems have a structural nature, and the potential growth rates will be limited to annual 1.5–2.0% in the upcoming three to five years".
Nevertheless, the evolving slowdown is not a result of a liquidity shortage in the economy, Natalia Orlova opined. "There is liquidity in the economy, which is the reason why we have been witnessing a capital outflow year after year. Capitals are going away because companies do not find a sufficient use for this money. In other words they make money but are not ready to invest," Natalia Orlova pointed out.
The Alfa-Bank Chief Economic mentioned the demographic situation in the country amongst causes of the economic growth slowdown: "The younger generation has shrunk by 14 million in the country in the past two decades and it is not surprising that the country boasts a historically low level of unemployment and unemployment rates have been declining to 4.9% in recent months in spite of the slowing economy".
In addition, Natalia Orlova noted that an increase in salaries the Russian economy had been seeing was fundamentally linked to the deficit of human resources.
The aforementioned factors and many others create a risk of higher inflation, Natalia Orlova presumed. "2015 inflation risks have significantly increased, 8% inflation has been forecasted and the price growth rates may reach up to 10% in the middle of the year," the analyst responded to a question about inflation. "The mounting inflationary pressure, the sanctions and FRS rates to be increased in 2015 are fraught with the risk of a new round of growth in domestic rates. In the long-term period the inflationary pressure is provoked by larger budget expenditures".
In her words, the slowing economy is the only factor which curbs down inflation.
In recent years Russian citizens were not saving more than they did in the previous periods, Natalia Orlova said, "The savings ratio in Russia keeps at around 10% of income, same as it was before the 2007–2008 crisis although inflation rates have slowed down." Natalia Orlova indicated that savings were being re-routed to real estate.
Speaking about an economic growth forecast for southern Russia, the Alfa-Bank Chief Economist said the situation in southern regions was better than Russia’s average, "You have a farming region here and companies of this sector may take advantage of the food import limitations and build up their production muscle".
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