Russia’s economic output plunges

Russia’s economy shrank by a startling 9.5 per cent in the first three months of the year under the weight of the global economic crisis, forcing the government to radically revise its yearly forecast, a senior official said Thursday.

MOSCOW — Russia’s economy shrank by a startling 9.5 per cent in the first three months of the year under the weight of the global economic crisis, forcing the government to radically revise its yearly forecast, a senior official said Thursday.

Russia has experienced a stunning reversal to its eight-year economic and consumer boom, when growth averaged about seven per cent on the back of soaring oil prices. The economy started to nosedive last fall after the price of oil, its key export, collapsed, investors pulled billions of dollars out of the country and industrial output slowed.

In comments confirmed by the Economy Ministry, Deputy Economy Minister Andrei Klepach on Thursday also described as “quite realistic” the forecasts made by the International Monetary Fund, which says Russia’s gross domestic product could shrink by six per cent in 2009.

Klepach warned Russia could see an even steeper GDP decline of up to 10 per cent in the second quarter.

“It’s much bigger than what we expected,” said Clemens Grafe, an economist at UBS, referring to the quarterly drop. “This is clearly a shocking number — no question.”

He suggested that some of the drop could be attributed to Gazprom, Russia’s state-owned gas giant and the country’s largest company, after gas exports plunged in the first quarter on the back of a huge downturn in demand and expectations that gas prices will continue to fall. They lag oil prices by six to nine months.

The gloomy predictions coincided with a much hoped-for move by the Central Bank to cut the refinancing rate from 13 per cent to 12.5 per cent, providing some relief for borrowers. Companies unable to access credit in frozen overseas markets have grumbled that local banks are offering loans at exorbitant rates.

In contrast to many European countries, Russia had raised interest rates to combat soaring inflation at the expense of higher borrowing costs. But recent data suggests the threat is beginning to recede.

“Russia is now over the peak on the inflation side, and policy can now start actually becoming supportive of the economy,” Grafe said, adding that he was skeptical of Klepach’s dismal predictions for the second quarter. “But it will take some time.”

Officials had forecast that GDP would decline by 2.2 per cent this year, a figure economists said was optimistic. The government will now revise that outlook, he said.

Just Posted

PHOTOS: Samson Cree Nation Pow Wow

The Samson Cree Nation hosted its annual Pow Wow, celebrating youth last weekend

Come play at Medicine River Wildlife Centre

Grand opening of new playground

Red Deer group looking to keep roads safe for cyclists

A Red Deer cycling group is concerned about road safety after multiple… Continue reading

Smoke and pets do not mix

Take care of your pets during the smoky weather

WATCH: Raising money for kids at the Gord Bamford Charity Golf Classic

Former NHL players, Olympians, pro rodeo circuit members and musicians teed off… Continue reading

Canadian soccer captain Christine Sinclair continues to lead fight against MS

TORONTO — Christine Sinclair continues to have an impact on and off… Continue reading

In Franklin’s anthems, women heard an empowering message

NEW YORK — Aretha Franklin never saw herself as a feminist heroine.… Continue reading

Happy birthday Boler: 100s of cute campers in Winnipeg for anniversary gathering

WINNIPEG — Angela Durand sits outside her camper which is decorated to… Continue reading

Merkel, Putin share a headache: Donald Trump

FRANKFURT — German Chancellor Angela Merkel and Russia’s President Vladimir Putin will… Continue reading

Tim Hortons says its China expansion will include menu with congee, matcha

TORONTO — The president of Tim Hortons says a plan to conquer… Continue reading

Trump suggests Canada has been sidelined from latest NAFTA negotiations

OTTAWA — U.S. President Donald Trump is suggesting Canada has deliberately been… Continue reading

Photographer files complaint with police after alleged assault while on the job

TORONTO — A Toronto newspaper photographer said he opted to file a… Continue reading

Annual inflation rate jumped to 3.0% in July, highest reading since 2011

OTTAWA — Statistics Canada says higher gasoline prices helped push the country’s… Continue reading

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month