Zee Beam News

05-15-2009 - Bloomberg by Alex Nicholson - Russia’s economy shrank an annual 9.5 percent in the first quarter, the worst contraction in 15 years, as industrial production slumped and the government’s 3 trillion ruble ($93.5 billion) stimulus package failed to boost lending. Gross domestic product shrank 23 percent from the previous quarter, the Federal Statistics Service said on its Web site today, citing preliminary data. The annual decline was forecast by Deputy Economy Minister Andrei Klepach on April 23. While the first-quarter performance indicates Prime Minister Vladimir Putin’s stimulus plan was insufficient, investors are anticipating a recovery. The ruble rose 0.3 percent today, capping its 12th weekly advance, after crude oil rebounded and the central bank predicted a current-account surplus. The Micex stock index rose 0.2 percent and is up 62 percent this year. “The big dip in industrial production jumps in your face,” said Tatiana Orlova, a Moscow-based economist with ING Groep NV, who plans to lower her forecast for a 2.7 percent contraction this year. “The government should be worried. It’s very easy to come up with headlines announcing bailout measures, but the situation shows that you have to adjust them. It’s hard to do these things fast.”
Medvedev Criticism: President Dmitry Medvedev has criticized the work of the government this week, while Putin was on a trip to the country’s Far East, Japan and Mongolia. A $9 billion slate of guarantees aimed at kick-starting lending to the companies designated as strategic enterprises had “failed,” Medvedev said on May 13. Today, Medvedev poured cold water on the government’s bid to diversify the economy away from a dependence on exporting oil, gas and metals. The average price of Urals crude oil in the first quarter of the year is 53 percent lower than in the year before period at $44.08 per barrel. Urals was at $56.94 per barrel today. Energy, including crude oil and natural gas, accounted for 68.7 percent of exports to the Baltics and countries outside of the former Soviet Union in the first two months of the year, according to the Federal Customs Service. “There have been no significant changes in the technological level of our economy,” Medvedev said in a meeting today outside Moscow.
‘Only on Paper’: The country’s venture fund, special economic zones and so- called techno-parks, all aimed at nurturing high-tech industries, “exist only on paper,” he said. Businesses are also to blame and only invest where a “high, quick return” is guaranteed, he said. Productivity in Russia is one-fourth the level in the U.S., Medvedev said at the meeting with ministers, including First Deputy Prime Minister Igor Shuvalov and Economy Minister Elvira Nabiullina. Alfa Bank, Russia’s largest privately owned bank, yesterday joined Goldman Sachs Group Inc., Citigroup Inc. and the International Monetary Fund in revising down the forecast for growth this year. Alfa cut its outlook to a 5.7 percent contraction from a drop of 3 percent. First-quarter declines in the construction industry and transportation, seen as proxies for economic activity, suggest “further negative surprises,” according to Alfa economist Natalia Orlova.
Property Developers: Billionaire Mikhail Prokhorov, Russia’s richest man, said Russian property developers may suffer more as the country slides into recession. “The crisis hasn’t hit developers in full yet,” Prokhorov told reporters in Yelets, Russia, today. “The worst is yet to come.” Still, Tatiana Orlova, at ING, said she expected the contraction the first quarter to be the deepest in the year. While the economy is not improving, “at least it is deteriorating at a slower pace,” she said. The stimulus measures, that were approved in the revised budget, which was approved in April, will gradually start to slow the fall, she said. The economy grew 8.7 percent in the first three months of last year, the second-highest rate since the third quarter of 2000.