MOSCOW, May 23 (Reuters) - Russia's economy is charging ahead while much of the world languishes but some analysts spot troubling signs that a chance to lay the foundations for future growth could be frittered away in a consumer boom.
Fuelled by strong crude prices, Russia's oil-exporting economy grew 6.6 percent in the first four months of the year and many economists have hastily updated growth forecasts for the whole year.
"We expect six percent growth this year and five percent next year. This is very much conditioned by oil prices," said Alexei Zabotkin, an economist at United Financial Group, a Moscow-based investment bank.
The government's official growth target, which is 4.5 percent, is likely to be revised upwards in coming months.
The International Monetary Fund (IMF) is still erring on the side of caution, and is predicting the economy will expand by just four percent, to the dismay of more optimistic private economists and brokers.
With oil prices now in the $25 dollar a barrel range, below highs of more than $30 a barrel in run-up to the U.S.-led war to topple Iraqi leader Saddam Hussein, Russia's economy is expected to cool a little in coming months.
"I would be amazed if Russia grows at six percent in the year with these oil prices, because I don't see the drivers there," said Vladimir Tikhomirov, an economist at Russian investment house Nikoil.
Even with the economy humming along, Russia has for many years lagged well behind the so-called Asian Tiger economies, such as Thailand, Malaysia and Taiwan, in the amount of money that it ploughs back into productive investment.
AGEING INFRASTRUCTURE
Investment in post-Soviet Russia, which needs to spend billions of dollars to modernise creaking railways, decrepit schools and a degraded road network, amounts to around 18 percent of gross domestic product.
That is well below levels of around 30 percent in the fastest-growing Asian economies and in Japan during its years of rapid expansion after the second world war.
Investment has been steadily rising as the economy booms but wages are surging ahead even faster, which augurs ill for hopes that Russia can rebuild a badly deteriorated manufacturing base.
"From 2002 growth is driven clearly by consumption and investment is slowing," said Natalya Orlova, an analyst at Alfa Bank.
Orlova said that with some 60 percent of Russia's productive capacity out of date, the country needed far more investment.
"The ratio of investment to gross domestic product will increase, but even at 20 percent it would be quite low. We should modernise our economy," said Orlova.
The real concern for many economists is that, with wages rising too fast, there is little evidence higher pay is being matched by rises in productivity.
"Wages should go up in real terms but should not go up too fast," said Zabotkin. Wages rose by a real annual rate of around 10 percent in the first quarter, he said.
Over the past three years wages have consistently grown by more than investment, a trend which many analysts find disturbing.
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