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October 18, 2012


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Alexander Mercouris

Dear Patrick,

As I am in Helsinki at the moment I only have time for a brief comment on your usual masterly summary.

1. The 2.8 percent growth is for the month of August only. Growth for the year as a whole to the end of August is running at about 4 percent. I suspect the reason for the poorer growth in August was the relatively poor harvest this year. My guess is that growth overall this year will be around 4 percent though this could be effected by external factors eg. the eurozone crisis. Growth could be much higher if the government was prepared to run a budget deficit as it could easily afford to do and if it was prepared to runs risks with the current account and with inflation but perhaps wisely it is not prepared to do these things. Overall the economy continues to do better than was anticipated a few years ago. The budget is in surplus for the second year in a row when it was anticipated it would be in deficit, the current account is also in healthy surplus, the country's reserves are growing, the state of the financial system is much stronger than pre 2008 and underlying inflation continues to fall.

2. I agree with you about Saakashvili. I am afraid I will not be convinced he is going until he is gone.

Patrick Armstrong

Ah well, others have pointed out my error.
But the bottom line is that Russia Inc is doing better than anyone else in the G8 except Canada.
Which brings us back to Putin's remark 12 years ago "It will take us approximately
fifteen years and an annual growth of our Gross Domestic Product by 8
percent a year to reach the per capita GDP level of present-day Portugal or
Spain, which are not among the world's industrialised leaders."

Wikipedia gives these numbers for 2011
RF $16.7K
Port $25.3K
Spain $30.4K

But Russia's going up, and they're going down and the 15 years aren't up yet.

History moves in interesting ways.

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