Russian Economic Report

Abstract

The global recession has deepened, with larger than expected declines in output and employment in many countries, Russia included. Global output is now expected to decline full 2.9 percent in 2009, with high-income countries hardest hit. Real economy and social impact on Russia was also larger than anticipated just a few months ago. And Russia’s real GDP in 2009 is likely to contract about 7.9 percent in 2009. Unemployment could rise to 13 and poverty to 17.4 percent by year end. And Russian middle class measured by household consumption is likely to shrink - by about 10 percent - from 55.6 to 51.2 percent (a decline of 6.2 million people). But 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. But given the weak global demand, external environment for Russia will continue to be difficult over the next 18 months. Short-term policy emphasis continues to be warranted for social assistance, infrastructure and small and medium size enterprises. With more constrained financing environment for the government and the private sector in the post crisis period, Russia should accelerate structural reforms aimed at raising productivity and improving diversification and competitiveness.

Keywords: Russia, Russian economy, growth, inflation, unemployment, poverty

JEL Classification: E1, O1, O11, O12, O52, P30