Russia's worst drought on record will take a substantial chunk out of growth and increase inflation risks just as the economy manages a fragile recovery after recession, an official said Tuesday.
Deputy Economic Development Minister Andrei Klepach told reporters that the drought would cut at least 0.7-0.8 percentage points from 2010 growth, in the first official estimate of the cost of the disaster.
The drought has destroyed one quarter of Russia's crops, leading the government to slap a controversial blanket ban on grain exports earlier this month which caused commodity prices, especially wheat, to soar.
Klepach acknowledged that the drought would cause inflation to tick higher as the supply of key agricultural goods shrinks, a factor which could also affect consumer demand.
"The effect of the drought will be minus 0.4-0.5 percentage points as a direct effect and, as a whole, minus 0.7-0.8 percentage points, if not higher," Klepach said, according to Russian news agencies.
Russia saw record temperatures throughout July and early August which also sparked hundreds of wildfires that claimed over 50 lives and have only now been controlled.