Russia's recession this year may be 50 percent deeper than during the 1998 crisis, a senior finance ministry official said on Tuesday, a day after President Dmitry Medvedev called for a conservative approach to forecasts. Russia's once buoyant economy has been undermined by lower oil prices, the fall in world demand for its commodities, and the world-wide credit crunch which has left companies struggling to refinance foreign loans secured in better days.
Under a pessimistic scenario, the economy could shrink 6.0-8.0 percent this year, deputy finance minister Oksana Sergiyenko told reporters - significantly weaker than previous official forecasts. Such a contraction would cut budget revenues by up to an extra 300 billion roubles ($9.66 billion) and raise the deficit to 9 percent of gross domestic product (GDP).
The current budget is based on a deficit of 7.4 percent and an economic contraction of just 2.2 percent. But Medvedev said on Monday the slowdown will likely be deeper than that and the Economy Ministry has already forecast it could reach 6 percent.
"It doesn't necessarily mean that the economy will develop in this way, but we must take risks into account," Sergiyenko said. At 8.0 percent, the contraction would be about 50 percent sharper than the 5.3 percent during the last recession in 1998, but Russia's economy is much bigger now. The International Monetary Fund forecasts suggest it will end the year at least four times bigger in dollar terms than it was a decade ago.
The slowdown accelerated to 10.5 percent year-on-year in April from 9.5 percent in March, deputy economy minister Andrei Klepach said on Tuesday. The overall performance was probably dragged down by a record contraction in industrial output and a continued slowdown in retail sales as Russians face job cuts and salary reductions. "Clearly, despite the bounce back in oil prices, the Russian economy is proving slow to respond," said RBS analyst Tim Ash.
Comments
Comments are closed.