Russia: industrial output slows, red tape on the line

More evidence on Monday of the slowdown in the Russian economy, with data showing industrial output rose just 2 per cent in September, down from 2.1 per cent in August and short of market forecasts of 2.2 per cent.

Despite some arguments about statistical quirks in the figures, there was no mistaking the general sluggishness. But, with inflation still high, the central bank won’t be cutting interest rates any time soon. After a surprise hike in September, economists are divided over whether the central bank will consider another one next month.

Meanwhile, foreign business leaders say Russia still faces big hurdles in realising its economic potential. At a meeting at the weekend with Prime Minister Dmitry Medvedev, the Foreign Investment Advisory Council presented a report on the opinions of foreign business people in Russia. It showed that while 71 per cent of respondents were highly satisfied with their investments in Russia, 75 per cent complained about excessive bureacracy, 64 per cent about corruption and 60 per cent about poor infrastructure.

As Vedomosti, the FT’s sister newspaper wrote on Monday, “these figures have remained virtually unchanged since 2007, when this survey was conducted for the first time”.

Konstantin von Eggert, deputy editor of Kommersant FM, a news radio station controlled by the Kommersant newspaper group, wrote in a blog for the World Economic Forum that WTO accession will change Russia – but only slowly:

There was one bright transformative moment recently when Russia joined the WTO, thus confirming to itself and the world at large that its economy is forever inextricably linked with others in the age of globalization. However, it will take years before Russia feels comfortable in the organization and learns the ropes in the WTO’s never-ending give and take process.

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