Gross domestic product contracted an annual 10.9 percent in the second quarter, the Federal Statistics Service said today, citing preliminary data. The service’s data go as far back as 1995.
Russia’s economic decline is worsening after output contracted 9.8 percent in the first quarter, ending 10 years of expansion that averaged close to 7 percent. The worst global financial crisis since the Great Depression undermined demand for Russia’s oil, natural gas and metals. Industrial production plunged as companies depleted stocks and struggled to raise funds during the credit crunch.
Russia crumbled” after commodity prices collapsed, Medvedev said. Energy, including oil and natural gas, accounted for 68.8 percent of exports to the Baltic states and countries outside the former Soviet Union in the first six months of the year, Russia’s Federal Customs Service said last week.
Urals crude oil, Russia’s chief export earner, averaged $61.03 a barrel during the last quarter after reaching a record $142.5 in July 2008.
The government has done catastrophically little” to diversify the economy in the decade since the 1998 financial crisis, Sergei Voloboev, a Credit Suisse economist in London, said by phone. GDP probably shrank a seasonally adjusted 0.2 percent in the second quarter compared to the first three months, according to Credit Suisse.
The Micex Index, which is mostly made up of energy companies, slipped into a bear market in June after falling more than 20 percent from its high on June 1, on concern a prolonged recession will cut demand for fuel. It gained 8.4 percent in July and is up 79 percent this year.
The world’s biggest energy exporter may run a budget deficit as wide as 9.4 percent of GDP this year, the country’s first shortfall in a decade, as plummeting demand for commodities threatens to cut revenue by a third, according to the Finance Ministry.
Russia has earmarked 2.51 trillion rubles ($79 billion) in spending to battle the slump, including funding designated for carmakers, agriculture and construction. The anti-crisis” program was signed into law by Putin on June 19.
Russia’s economy will need between four years and five years to match last year’s pace of growth, Finance Minister Alexei Kudrinsaid yesterday. GDP in 2008 grew at the slowest pace since 2002, expanding 5.6 percent compared with 8.1 percent a year earlier. The IMF forecasts a 6.5 percent economic contraction for Russia this year, followed by growth of 1.5 percent in 2010.
The central bank’s five interest-rate cuts since April 24 have failed to spur lending as banks hold back on concern borrowers can’t repay loans. Lending to consumers dropped 1.1 percent in June for the fifth consecutive monthly decline and banks shrank their corporate loan books by 1.2 percent, according to central bank data.
By the end of 2009, 17.4 percent of the population, or 24.6 million people, will be living beneath the subsistence level of $185 per month, almost 5 percent more than before the crisis, the World Bank said in a report released in June.
Rising numbers of jobless and falling wages will cut the country’s nascent middle class by 10 percent, or 6.2 million people, to about 51.2 percent of the population, the Washington- based lender said. Household consumption, the main source of growth in recent years,” is collapsing,” it added.
The economy may start to show signs of recovery in the third quarter this year, Deputy Economy Minister Andrei Klepach said on July 23.
GDP expanded a non-seasonally adjusted 7.5 percent from the previous quarter after contracting 23 percent in the first three months, the office said.