OECD Economic Outlook 69 - Biblioteca Hegoa

with a 7 per cent increase in urban incomes. Farmers’ incomes were hit particularly
hard by the large fall in grain output last year. As a result, the growth in private consumption
has been concentrated in the booming large cities in the coastal area, while
consumption growth in rural areas has remained subdued. Other parts of the economy
including collective enterprises also continued to lag behind the dynamic foreign-investment
sector and the relatively small number of large state-owned
enterprises in certain sectors such as petroleum, power, telecommunications, and
electronics.
The government continued to inject substantial fiscal stimulus last year, with an
issuance of extra-budgetary treasury bonds of RMB 150 billion ($18 billion), which
is estimated to have contributed 2 percentage points to last year’s GDP growth. The
continued fiscal pump priming resulted in a significant rise in the budget deficit,
from 2.1 per cent of GDP in 1999 to 2.8 per cent in 2000. The government has
pledged to issue the same level of treasury bonds this year, which will mark the
fourth consecutive year of large fiscal spending aimed at maintaining growth and
employment. As last year, this year’s fiscal package will mainly be used for infrastructure
construction, in particular, in relatively underdeveloped western regions.
The direct effects of the fiscal stimulus are expected to abate over the next two
years, so that growth will become more dependent on private consumption and enterprise
investment. Real GDP growth this year is expected to moderate to around
7½ per cent, due to the smaller contribution from net exports and state investment.
Nonetheless, higher corporate earnings in 2000 and the projected rise in the inflows
of foreign direct investment are expected to sustain investment spending in 2001.
The growth of private consumption is expected to remain stable, driven by the strong
rise of incomes in urban areas and improving consumer sentiment, although growth
in rural consumption is likely to remain subdued. The economy should pick up
in 2002, pulled up by higher export growth as external demand recovers and domestic
demand continues to be strong. Import growth, spurred by purchases of foreign
capital equipment, will continue to outpace export growth. The current account surplus
is projected to decline as the goods and services trade balances deteriorate.
Beyond the near term, growth prospects depend on further progress in implementing
structural economic reforms, in particular rationalisation of the state-owned industrial
and financial sectors. The capacity for further fiscal stimulus is narrowing given
the rising deficit, the relatively low level of government revenues, and the future
demands that will arise from social security and other economic reforms.
The Russian Federation
The Russian economy exhibited strong expansion in 2000 for the first time since
the beginning of economic transition. Preliminary estimates indicate growth of nearly
8 per cent, with fixed capital investment rising by 17 per cent. The increase in output
was based broadly across many sectors and branches of the economy, while investment
was concentrated in energy and transportation. Russian firms benefited from a weak
rouble, strong export prices especially for oil, and higher domestic demand. Household
incomes rose by an estimated 9 per cent during the year, yet still remain almost 20 per
cent below their values on the eve of the 1998 economic crisis. Leading indicators and
Developments in selected non-member economies - 141
… and continued to be
supported by fiscal stimulus
Output growth will
remain strong
The Russian economy has
exhibited strong growth, but the
pace appears to have slowed
since the fourth quarter of 2000
© OECD 2001