The recession in Russia will run deeper and longer than it appeared even a few months ago, the World Bank concluded in a report released Wednesday, underscoring the impression that Russia has been one of the countries hit hardest in the downturn.
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The Russian economy, which seesaws from boom to bust along with commodity prices in the best of times, has experienced the most extreme swing from growth to contraction of any large economy in the current downturn.
The bank’s new projection showed that the Russian economy would contract by 7.9 percent this year and not recover to precrisis levels until at least 2012. Just before the crisis reached here, in the first quarter of 2008, Russia had been growing at an annual rate of 8.7 percent.
The bank’s estimate was all the more remarkable because oil prices have recovered recently, a positive sign for resource-dependent Russia. About two-thirds of exports, for example, are made up of oil and natural gas. Yet the International Monetary Fund, the Russian government and private banks all project slower growth, The New York Times reports.
The World Bank’s prediction on the timing of Russia’s recovery means nearly half a decade will be lost, Zeljko Bogetic, the bank’s chief economist in Russia, said at a presentation of the report.
“The economic downturn and social impact has so far been larger than expected,” he said.
As recently as April, the bank had predicted a decline of 4.5 percent.
As the global recession deepened last winter, Russia spent about $200 billion, or a third of its precrisis foreign currency reserves, defending the ruble during a gradual devaluation. This spring the tables quietly turned as oil prices rose, and the Russian Central Bank has made back about $30 billion since March by intervening to prevent the ruble from appreciating, the report said.
he World Bank said a delay in Russia's accession to the World Trade Organisation caused by a decision to form a customs union with Belarus and Kazakhstan could undermine benefits from a rules based trading regime.
The report said lower inflation has created room for more official interest rate cuts, which should help investment in the second half of 2009. But it also warned that overvaluation of the rouble could hurt the recovery.
It expects inflation to reach 11-13 percent this year. The nation's current account surplus is forecast at $32 billion in 2009 and $36 billion in 2010.
The World Bank said capital outflows will total $60 billion this year and decline to $30 billion in 2010.
Non-performing loans could reach 10 percent of the total in banks' portfolios, the report said, adding that consolidation in the sector should be accelerated, Reuters reports.
Read also: “Russians take credit crunch in their stride”
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