Maxim Tovkailo
Top official sees signs of a looming recession in Russia.
The Russian economy shows a downward trend. According to the results of the fourth quarter of this year, the GDP growth rates will drop to 2.6% against 7.3% in the preceding three quarters, the economic development ministry reports. Government experts do not know how long the recession will last. However, a statement made by Prime Minister Vladimir Putin at a meeting of the heads of government of the EurAsEC countries on December 12 that the Russian Government would reserve about 9 trillion roubles ($306.23 billion) for support of the banking sector alone gives us grounds to believe that the Government is preparing for a protracted recession.
SIGN OF RECESSION
On Friday morning, the official websites quoted Andrei Klepach, deputy economic development minister, as saying that a negative GDP growth will be registered in the fourth quarter of this year. Klepach predicted that the decline might last. "Recession in Russia has already begun and I am afraid two quarters will not suffice to overcome it," he said.
However, several hours later the economic development ministry repudiated these statements.
The ministry's Internet site press release says GDP growth will still be positive in the fourth quarter and reach 2.6% (about 6% by the yearend). It also says that Russia's relatively high economic growth this year was due to the economic performance in the first six months of the year. In other words, this was before the global crisis.
Earlier, the economic development ministry predicted end-of-year economic growth at 6.8%. There are several reasons for a downward (though insignificant) revision of the forecast. First, Russia's economic growth rates from January to September were lower than the ministry predicted. The ministry thought it would be 7.7% at least, not 7.3% as the Federal State Statistics Service calculated recently.
Second, industrial production in November-December will not exceed 1% or could even register a fall. In October, it dropped to 0.6%, against a 6.3% growth in September. Overall, the economic development ministry expects industry to grow by 1.9% during the year, which is the lowest indicator over the past eight years.
The third, and final, factor behind economic decline is a fall in oil prices. An export constituent is essential for GDP calculations. Russia's GDP growth directly depends on world prices of energy resources accounting for the bulk of Russian exports. Many experts explained high GDP growth last year (8.1%) by high oil prices.
COST WHAT IT MAY
Considering that there are no prerequisites for a surge in oil prices, and industrial production is not likely to rise to its previous level in the near future, Klepach's recession fears may come true in 2009.
At present, the economic development ministry is completing its forecast for the country's social and economic development in the next three years. The ministry planned to submit the document to the Government by December 1, but its coordination with the finance ministry took more time than expected. Oksana Sergiyenko, deputy finance minister, told the Gazeta correspondent that the ministry would submit new wording for the document to the finance ministry on December 15.
No matter how deep and protracted the recession might be, the Government promises its assistance to banks, businesses and people. According to a Gazeta source, a newly formed state commission for anti-crisis measures will have its first meeting within the next few days. Prime Minister Vladimir Putin placed Deputy Prime Minister Igor Shuvalov in charge of this commission, which will have to eliminate financial "clots" in the banking system.
"About 4 trillion roubles have been earmarked for support of the banking sector. All in all, the Central Bank and the Government have reserved up to 9 trillion roubles for this purpose," Putin said addressing the EurAsEC meeting of the heads of government on December 12. Thus, the Government is prepared to spend a sum equivalent to the 2009 budgetary expenditures to support banks.
However, an additional 5 billion roubles will not help to lower interest on loans while the Central Bank is continuing to fight capital flight by raising its refinancing rates. The Government admits this, ready to subsidise two-thirds of loan rates to the defence industry and agricultural producers, and also to allocate 300 billion roubles for surety to banks on loans to strategic enterprises.
The social sector is another government concern apart from the banking sector and industry. In order to cut costs, companies give up their investment projects and reduce the number of personnel. In October, the number of the unemployed in Russia reached 4.6 million, 8% more than in October 2007. "This is an alarming signal. We do not see any change for the better," Vladimir Putin admitted. The situation is aggravated by soaring inflation which hits ordinary people. The Prime Minister said that end-of-year inflation would reach 13.5%.
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EMPLOYERS TO REPORT TO EMPLOYMENT SERVICES
The State Duma has passed, in its first reading, amendments to the law on employment in Russia and to the 2009-2011 budget aimed at helping people who have lost their jobs. The draft law entitles the Government to use the 2009 federal budget funds to support the labour market. They will be used, in particular, to retrain people facing dismissals, resettle them in other regions for employment and training, and finance public works.
In turn, when introducing part-time working day (shift) or shorter week, or temporary work suspension "for economic, technical or organisational reasons, employers will be obliged to inform employment services about this no later than ten calendar days prior to the introduction of the above measures."
The deputies also intend to make the unemployment benefit for those who have left job of their own free will equal to that paid to people who have been dismissed.
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KYRGYZSTAN ASKS FOR A $2 BILLION LOAN FROM RUSSIA
Addressing a meeting of the EurAsEC countries' heads of government, Russian Prime Minister Vladimir Putin said Russia was ready to grant a $2 billion loan to Kyrgyzstan. "Out of this sum, $300 million will be used to support the Kyrgyz budget and $1.3 billion to implement major infrastructure projects, including those in the energy sector," he said.
Vladimir Putin did not specify the terms of the loan. According to Putin, a decision on granting the loan may be taken by the end of this year. If it is positive, Kyrgyzstan will become the second country in the post-Soviet space to receive aid from Russia. Earlier, Russia issued a $2 billion loan to Belarus.
