Low oil, metal prices drive GDP contraction
MOSCOW – Russia’s economy will shrink by 7.9 percent this year, plunging millions of people into poverty and pushing the unemployment rate to 13 percent, the World Bank said Wednesday.
The contraction in gross domestic product has been “much larger” than anticipated, and growth is unlikely to pick up even with buoyant oil prices this year, said Zeljko Bogetic, the World Bank’s lead economist for Russia.
“The sheer force of the downturn in the first half is going to determine the economic outcome for this year,” Bogetic told journalists after the release of the quarterly report on the Russian economy, which downgraded the bank’s earlier forecast for a 4.5 percent drop in GDP this year.
Bogetic also warned that the social impact could be significant. The World Bank estimates up to 7.5 million Russians could fall below the poverty line this year, putting huge pressure on the government to boost social spending and contain mounting discontent as wage arrears grow and layoffs continue.
Russia is one of the major economies to be hit hardest by the global financial crisis, which drove the prices of its crucial oil and metals exports sharply lower and dried up access to credit. Russia’s downturn accelerated last month, with the economy shrinking by an annual rate of 11 percent in May and 10.2 percent over the first five months.
In a marginally more upbeat assessment, the Organization for Economic Cooperation and Development predicted Wednesday that the Russian economy would decline by 6.8 percent this year, and said the crisis had been “aggravated” by the government’s delay in rolling out its stimulus package to vulnerable areas of society, particularly the unemployed.