Russian economy contracted by 7.9% in 2009

Tuesday, February 2, 2010

Preliminary data from the Russian Federal Statistics Service says that the country’s economy contracted by 7.9% in 2009 compared with the year before.

It was the largest decrease in fifteen years, since 1994, but still smaller than the 8.5% contraction predicted by the government. The drop was largely attributed to the fall in oil prices last year.

The World Bank predicts that the country’s economy will grow by 3.2% this year, due to better demand and higher oil prices.

The VTB Capital’s Russian Purchasing Managers’ index increased to 50.8, from a level of 48.8 the month previous. In a statement today, VTB said that “output rose for the sixth straight month and at a faster rate, as new orders increased for the first time since last October.”

The senior emerging market economist at Capital Economics, Neil Shearing, commented in a note to clients that “[the data] confirm[s] that last year’s economic decline was the biggest since 1994, surpassing even the 5.1% fall seen during the 1998 financial crisis […] The upshot is that healthy-looking growth of around (or even above) four percent in 2010 will only mask ongoing difficulties in the Russian economy,” he added, predicting that growth would drop to 1.5% by 2011.