Country Report Russia October 2009

Summary

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.
The decision by the US president, Barack Obama, to abandon plans to install an anti-ballistic missile defence system in eastern Europe could open the way for a significant improvement in US-Russian relations. One area where US-Russian relations are likely to see progress is on arms control.
The government is extending considerable help to the economy, as well as to some of the country's largest private companies. Under the impact of the economic downturn, the budget has shifted to a large deficit, estimated at 7.7% of GDP in 2009, and is expected to narrow to 5-6% of GDP in 2010-11.
Since April the Russian Central Bank (RCB) has cut the key refinancing rate seven times, by a total of 300 basis points. The refinancing rate is likely to be cut by a further 50 basis points before the end of 2009, to 9.5%.
The contraction in real GDP is estimated at 7.4% in 2009. The delayed impact of the government's large stimulus package, more favourable external conditions and lower interest rates will underpin a return to growth, forecast at 2.5% in 2010 and at 4% in 2011.
Reduced domestic demand and lower oil prices than in recent years will help to contain inflationary pressure.

In a recent article the president, Dmitry Medvedev, offered a sombre appraisal of the state of Russian society, implicitly criticising the ten years of rule of Vladimir Putin, the current prime minister.
Mr Putin has suggested that he might be interested in running for the presidency in 2012, setting up a potential conflict with Mr Medvedev.
Interest rate policy, which saw the refinancing rate cut from 13% in late April to 10.5% in mid-September, reflects easing inflation.
Government spokesmen have indicated that Russia is planning to revive its privatisation programme, although no details have yet been revealed.
Recent data have been mixed on the question of whether Russia's recession has bottomed out. After two months of improvement, the data for August were generally disappointing.
Crude oil output rose by 1.8% year on year, to just above 10m barrels/day (b/d) in September. Oil output in January-September was 0.6% higher than in the year-earlier period.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37
NAICS Code: 336