IMF Report 2014 – Russia

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IMF Report 2014 – Russia
Russia’s growth is slowing because of pre-existing structural reasons and the fallout from geopolitical tensions. The growth slowdown that started in 2011 continued in 2013 despite accommodative policies as the economy hit capacity constraints. The fallout from recent geopolitical tensions relating to Ukraine and, to a lesser extent, the turmoil in emerging markets (EM) following the Fed’s discussion of tapering unconventional monetary policy are bringing the economy to a standstill. 
This follows an almost doubling of Russia’s real GDP per capita over 2000-2012. During that period, growth also contributed to a significant decline in poverty rates and unemployment. However, after almost 15 years of growth based on rising oil prices, macroeconomic stabilization, and increasing use of spare resources, this growth framework has reached its limits.
The authorities had begun taking some steps toward addressing the structural bottlenecks. Since the 2008–09 crisis, the Russian authorities have strengthened their macroeconomic framework with the introduction of a fiscal rule, a transition toward inflation targeting and a more flexible exchange rate. Some structural reforms were initiated: the introduction of procurement and anti-corruption laws, measures to strengthen the judicial system, the creation of a Federal Business Ombudsman and a number of initiatives aimed at improving the business and regulatory environment. However, the privatization agenda has stalled and other structural bottlenecks continue to hamper growth, seriously constraining its long