World Economy

Russia Key Economic Drivers Deteriorate

Russia Key Economic Drivers DeteriorateRussia Key Economic Drivers Deteriorate

Consumer demand and investment activity, Russia’s key economic drivers, deteriorated further in April but at a slower pace, data showed Monday.

After growing by 7% a year on average in 2000s, Russia’s gross domestic product shrank by 3.7% in 2015 and has continued to contract, the result of low oil prices and western sanctions. Analysts’ views on exactly how the economy is set to perform this year differ, but the consensus is that lower consumer demand and falling capital investment are taking their toll, Nasdaq reported.

Retail sales, a gauge of consumer demand, dropped 4.8% on the year in April after declining 5.8% in March. On the month, retail sales declined by 1.4% after staging a month of growth in March, for the first time since December.

Finance Minister Anton Siluanov said last week that a lack of investment is crimping Russia’s economic growth potential, which is now seen at more than 1.5% a year.

Siluanov said that investment should become the main driver of economic growth instead of consumer demand.

The Federal Statistics Service also said Monday that real disposable household incomes fell 7.1% year-on-year in April after shrinking 1.8% a month earlier.

Russia’s latest economic reform package is set to cut state spending and raise the retirement age, the Vedomosti newspaper wrote Monday, Tass reported.

The reforms, which are due to be discussed Wednesday by President Vladimir Putin’s economic council, will focus heavily on stimulating domestic investment.

It is the first time the council has convened in several years despite Russia’s current economic crisis. The council hopes to achieve 4% growth in the country’s economy by 2019. The International Monetary Fund reported earlier this year that Russia’s economy will contract by 1.5% this year.

The Center for Strategic Research is to suggest structural reforms in a number of areas, including law enforcement, fiscal consolidation, pensions reform and lowering the state role in economy, Vedomosti said.