Moscow News
www.mnweekly.ru
August 18, 2009
No Russian recovery yet
By Tim Wall
At last, the green shoots of recovery are here! Or so says The New York Times, analysing the latest figures on the Russian economy.
The good news is that GDP recovered 7.5 per cent in the second quarter, compared with the disastrous first quarter, according to the State Statistics Committee. (Adjusted seasonally, the economy shrank 0.5 per cent - or more or less flattened out.) The bad news is that GDP still shrank 10.9 per cent in the second quarter compared to the same period last year.
From these numbers, Bank of America analysts conclude that the Russian recession is bottoming out - despite industrial output collapsing and the real level of unemployment stubbornly remaining stuck above 10 per cent.
Of course, what has really happened is that the oil price has recovered this year from around $30 to over $70, boosting GDP and replenishing depleted state coffers. Take off the oil mask, however, and the prospects for a sustainable recovery anytime soon look far more remote.
As a mechanism for getting investment flowing again into various industries, oil and gas revenues are a poor circulatory system for the economy. They can help to defuse unrest by boosting social spending, and allow the government to bail out banks and other big enterprises - but a large part of this money will simply go on servicing debts.
And the oil price is a dangerous two-way bet, whichever way you look at it.
As the Bank of England points out in a report this month, a surging oil price threatens to hit demand and snuff out economic recovery in the United States, China and other key economies. This would likely push the global economy into a more prolonged, W-shaped, recession.
On the other hand, Russia would obviously lose out from a lower oil price, even it helped bolster a modest global recovery. And that could tip Russian corporates over the edge into debt default, or provoke social unrest if unpaid wages mount and unemployment rises further.
Either way, reading signs of recovery into the latest figures seems premature, to say the least.
While a global recovery may be around the corner, don't bet on it including Russia just yet.
