Russia's once-booming economy will shrink by 7.9 percent in 2009 as it reels from the global economic crisis, a sharper contraction than previously expected, the World Bank said Wednesday. "Real economy and social impact on Russia was also larger than anticipated a few months ago.
And Russia's real GDP (gross domestic product) in 2009 is likely to contract about 7.9 percent," the World Bank said in a report. In its previous report on Russia, published in March, the Washington-based development lender had forecast that GDP would drop 4.5 percent.
Meanwhile the Organisation for Economic Co-operation and Development (OECD) estimated in a report Wednesday that Russia's economy would contract by 6.8 percent this year and then grow 3.7 percent next year. The Paris-based body, to which Russia does not belong, said: "Russia is suffering a severe recession, but the rebound in commodity prices and the expected effects of policy stimulus point to some recovery through 2009 and into 2010."
The World Bank said that the unemployment rate in Russia could rise to 13 percent and the poverty rate could reach 17.4 percent by year's end, amid declining industrial production and an unfavourable global environment. The jobless rate was 9.9 percent in May, the last month for which figures are available, according to state statistics agency Rosstat.
Russia has been badly hit by the global economic crisis despite early claims by officials that the country would be an "island of stability" amid the turmoil engulfing the rest of the world. Since last summer Moscow's stockmarkets have plunged and the Russian ruble has slid in value against the dollar as prices for the country's main export commodities - oil, gas and metals - have collapsed.
The economic strains threaten to undermine the government of Prime Minister Vladimir Putin, who during his 2000-2008 presidency achieved widespread popularity as Russia enjoyed stronge growth. The World Bank warned that one of the signature achievements of the Putin years, the rise of the middle class, would be set back by the crisis.
The bank forecast that the size of the Russian middle class, measured in terms of household consumption, would drop by 6.2 million people, from 55.6 percent of the country's population to 51.2 percent. On the bright side, the bank said government stimulus funds and a recent rebound in oil prices could help propel Russia back to growth next year.
"The large stimulus package, gradual recovery of oil prices and lower inflation could bode well for the second half of the year, and the Russian economy could return to modest growth in 2010," it said. "But given the weak global demand, external environment for Russia will continue to be difficult over the next 18 months."
The bank also urged Russia to work towards reducing its dependence on oil and gas exports, saying it should "accelerate structural reforms aimed at raising productivity and improving diversification and competitiveness."
Wednesday's World Bank and OECD reports come a day after the Russian state statistics agency revealed that GDP had contracted by a dramatic 11 percent in May compared with the same month last year. Natalya Orlova, an analyst with Moscow-based Alfa Bank, said the grim GDP figures for May were due, at least in part, to the fact that the government stimulus had yet to achieve its intended effect.