Crisis to cut Russian growth sharply: World Bank
18 Nov 2008, 2024 hrs IST, AGENCIES
MOSCOW: The global financial crisis is set to bring an abrupt end to years of strong growth in Russia and prevent more than a million of its
people from escaping poverty, the World Bank
warned on Tuesday.
The bank said it was slashing its growth forecasts for Russia to around six per cent in 2008 from 6.8 per cent previously, with 2009 down sharply at 3.0 per cent from 6.5 per cent.
"After a decade of high growth, the Russian economy is experiencing a slowdown in the wake of the global financial crisis," the World Bank said in its latest economic report on Russia.
Capital flight, the worldwide credit crunch, lower oil prices and the heavy losses on Russia's stock markets "are slowing domestic demand - hitherto the engine of Russia's growth," the bank said.
Between May and November, the stock market lost one trillion dollars (790 billion euros) in value - equivalent to 84 per cent of gross domestic product - with Russia's super-rich alone losing 300 billion dollars, it said.
The events have been a stark wake-up call for an economy that grew 8.1 per cent in 2007 and 7.4 per cent in 2006, driven largely by soaring commodity prices, especially for oil.
The report warned the financial crisis would have a significant human dimension in Russia.
"The implications of the financial crisis on Russia's poor are troubling ... The higher poverty headcounts imply that 1.3 million fewer people will move out of poverty between 2007 and 2009," the bank said.
But the bank also said that Russia's improved fiscal management had protected the country from the worst excesses of the shock and praised the government for a "swift, coordinated and comprehensive" response.
"Russia is better prepared today to deal with these challenges than at any time since the beginning of transition (from Communist rule in 1989)," it said.
Wealthy Russians to Lose $300bn on Global Collapse
The wealthy Russians will lose roughly $300 billion on the drop in capitalization of the country’s stock market, the World Bank forecasted in the report covering Russia’s economy.
What’s more, the industrial slowdown will impair the actual income of middle class and of the poor in Russia. As to the latter, the World Bank experts came up with two different scenarios.
Under the pre-crisis scenario that is based on the surge in per capita GDP of 6.8 percent in 2008 and of 6.5 percent in 2009, the share of the poor will narrow to 10.2 percent in 2008 and to 8.6 percent in 2009, shedding by nearly a third in 2007 through 2009. Some 5.7 million will leave the poor category if this scenario ultimately materializes.
The second scenario has been made out with regard to financial collapse. It specifies the slowdown of 6.5 percent in 2008 and 3.5 percent in 2009 and foresees extension of the poor share to 10.4 percent in 2008 and 9.5 percent in 2009. As a result, the number of people that will escape from the poor category will be 1.3 million less in 2007 to 2009, according to the World Bank.
The World Bank downgraded the forecasted growth of Russia’s GDP from 6.8 percent to 6 percent in 2008 and from 6.5 percent to 3 percent in 2009. According to its outlook, the unemployment in Russia will step up to 5.9 percent by this year-end (the previous forecast was 5.3 percent).
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