Country Report Russia June 2009

Outlook for 2009-10

• The ruling "tandem" between the president, Dmitry Medvedev, and the prime minister, Vladimir Putin, could face a difficult test in its efforts to contain the social and political fallout from the economic downturn.
• Despite the new US administration's wish to start afresh in its dealings with Russia, it will take a long time to improve the substance of relations, as the two sides have significant differences on a range of issues.
• 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.
• Real GDP is forecast to contract by 5% in 2009, reflecting low commodity prices, restricted access to external financing and reduced external demand. A recovery to 2% growth is expected in 2010.
• 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 into a large deficit in 2009, of 8% of GDP. The current-account surplus is expected to fall sharply in 2009-10 relative to recent years.

Monthly review

• Mr Putin's visit to Pikalevo, near St Petersburg, where the financial problems of the town's leading employer led to protests, has highlighted the particularly acute difficulties faced by the hundreds of "mono cities" in Russia.
• In a surprise move, Mr Putin said that Russia wishes to join the World Trade Organisation (WTO) as a customs union with Belarus and Kazakhstan.
• The Russian Central Bank (RCB) has started to raise reserve requirements in order to return to traditional liquidity control.
• The RCB has intervened heavily to limit rouble appreciation, which was driven by higher oil prices and renewed capital inflows. With inflation falling, it has cut the refinancing rate again.
• The IMF has called for a stress test of Russian large and medium-sized banks.
• Real GDP fell by 9.8% year on year in January-April, according to estimates from the Ministry of Economic Development. However, seasonally adjusted data and the purchasing managers' index in May suggest a better picture.
• The Russian stockmarket has been the second-best performing worldwide, encouraged by higher oil prices and improved global sentiment.
• Inflation fell for the second month in May, to 12.3% from 14% in March.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10;60;70;49;20;47;37;65;48;53
NAICS Code: 212;52;72;22;11;311;48;336;53;517;44