The report says the slowdown reflects a continuing difficult external environment, with growth in the eurozone remaining negative and the price of oil decreasing. Investment has remained subdued.
The Russian economy is expected to grow by just 1.3 per cent in 2013, well below the 3.4 per cent seen in 2012. Growth is likely to only partly recover in 2014, to 2.5 per cent, accelerating slightly in the medium term.
The report notes that net private capital outflows have persisted in Russia. Both the outflows and the relatively subdued investment activity “may in part reflect concerns about the quality of the overall business environment and effective cost of investment”, it adds.
The report says the recovery in growth seen in Russia next year assumes accommodating fiscal policy, including increased spending on large public infrastructure projects. However, it also points out that room for fiscal manoeuvre remains limited, with oil trading below levels needed to balance the budget.
The EBRD’s economists stress that “structural reforms and improvements in the overall business environment are needed to boost investment, diversify the economy away from excessive reliance on oil and gas revenues and lift Russia’s potential growth above 3 per annum”.