Country Report Russia July 2009

Outlook for 2009-10

• Although Russians are increasingly dissatisfied with the economic situation, this has not yet affected significantly the popularity of the leadership. The risk of an eruption of widespread, non-localised social unrest is relatively low.
• Given deep-seated differences on a range of issues, as well as low levels of mutual trust, the road to achieving a sustained and significant improvement in US-Russian relations will be long and difficult.
• The government seems increasingly wary of bailing out private companies and is now focusing on providing general help to the economy. Only a few firms can count on state aid with debt repayments.
• The year-on-year drop in real GDP in the second quarter of 2009, at about 10%, matched that of the first quarter. The Economist Intelligence Unit now forecasts that Russia's real GDP will contract by 7% in 2009.
• Reduced domestic demand and lower oil prices than in recent years will help to contain inflationary pressures.
• Under the impact of the economic downturn, the budget is forecast to shift to a large deficit in 2009, of 8% of GDP. The current-account surplus is expected to come down sharply in 2009-10 relative to recent years.

Monthly review

• Despite the liberal rhetoric of the president, Dmitry Medvedev, during his first year in office there have been few substantive changes in the political system.
• The visit by the US president, Barack Obama, to Moscow in early July and the signing of a framework agreement on reducing nuclear arms were small but significant steps towards rebuilding US-Russian ties.
• An assassination attempt on June 22nd on Yunus-bek Yevkurov, the president of the Russian republic of Ingushetia, was a serious blow to the federal government's attempts to stabilise the North Caucasus.
• The government has produced an anti-crisis plan for the second half of 2009. However, the plan appears to be little more than a formal restatement of the anti-crisis measures contained in the 2009 budget.
• Industrial output fell by 17.1% year on year in May, following a drop of 16.9% in April. This was the steepest annual fall since June 1993, but the underlying trends suggest that the sharp decline in output may be close to an end.
• The monthly rate of inflation reached 0.6% in June. Year-on-year inflation fell to an 18-month low of 11.9% because of weak demand and a stronger rouble.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;60
NAICS Code: 212;52