Is Russia’s economy stronger than they say it is?
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Jon Hellevig writes: I don’t know why Russia does this. They reported Q1 GDP growth of 0.5%. But they said the GDP deflator was 8.5%. GDP deflator is the factor by which you diminish the nominal GDP growth. The idea is that it would show the “real growth” of output instead of price inflation. In this methodological theory you would only show as output increase quantitative and qualitative growth but not price growth. But the inflation in the same period was only 5%. So, Russia decreases the GDP growth by much more than the inflation. At the same time, the price of oil and gas has not increased from last year, and not that of other commodities either.
So, where from do they find this 3.5% decrease above inflation? I would not exclude that there is a Serdyukov ploy playing out here. Referring to the time he was Minister of Defense and grabbing the headlines because of corruption, while at the same time under his term Russia made an incredible modernization of the army. The one that took over Crimea in a night, and Syria in two years. There’s a theory that Russia wanted they Yanks to think that the Russian army is a quagmire and will stay so until the time is right.
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So, perhaps I am giving the game away, and the Russian economy is actually growing much more than they want us to know.
At the same time, the real-real GDP, the one measured in PPP grows exactly by the nominal minus inflation plus the “nominal real growth” plus/minus difference in currency exchange to the USD. That is 9 – 5.5 + 0.5 + 0=4%
