Country Report Russia September 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 is extending considerable help to the general economy, as well as to some of the country's largest private companies. Under the impact of the economic downturn, the budget is forecast to shift to a large deficit in 2009, of 8% of GDP.
• The year-on-year drop in real GDP in the second quarter of 2009, at 10.9%, was worse than that of the first quarter. The Economist Intelligence Unit forecasts that 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.
• The current-account surplus is expected to come down sharply in 2009-10 relative to recent years.

Monthly review

• The security situation in the volatile North Caucasus region has continued to deteriorate, with the level of violence continuing to increase.
• The president, Dmitry Medvedev, has launched a public attack on his Ukrainian counterpart, Viktor Yushchenko.
• The latest plans from the Ministry of Finance envisage a Rb3.2trn (US$95.5bn) federal budget deficit in 2010, equivalent to 7.5% of officially forecast GDP.
• The IMF's latest report on Russia has identified the banking system as a significant policy problem, and was critical of official policies in this area.
• According to seasonally adjusted estimates from the Ministry of Economic Development, month-on-month real GDP returned to growth in June and July.
• Household consumption trends remain discouraging, based on confidence surveys and sharp year-on-year falls in real incomes and wages in July.
• Despite improving relative to the first quarter, corporate profits were still down by nearly one-third year on year in the second quarter of 2009.
• Goods exports fell by 11% year on year in January-June in volume terms, and by 47% in value terms.

This report covers the following industry codes:
SIC Code: 60;70;1
NAICS Code: 52;72;11