Moscow News
www.moscownews.ru
August 31, 2009
Is the recession over?
By Ed Bentley
We asked leading Moscow economists for their views on statements by goverment economic forecaster Andrei Klepach and other officials. "Is the recession over, but the crisis coninuing?"
Yevgeny Gavrilenkov
Chief economist
Troika Dialog
Russia's economic performance demonstrated signs of improvement around mid-year, which was in line with global trends. Industrial output grew strongly in June and July; while seasonally adjusted growth was also visible, albeit a bit slower. Investments and retail sales showed signs of month-on-month stabilisation as well. Even though year-on-year growth numbers are still negative, they will look better by the year-end. The recession in Russia seems to be over.
On the other hand, however, it is also pertinent to say that "the crisis is continuing" as the economy was (and still is) too dependent on cheap money coming from the budget.
Growth was artificially inflated by negative real interest rates and unbalanced as a result. The crisis will be over once we see more balanced and sustainable growth amid positive real interest rates.
Natalya Orlova
Chief economist
Alfa Bank
Around May and June the Russian economy found bottom, however this stabilisation reflects the recovery in global demand. This can allow Russia at best to generate a 1-2 per cent growth rate in the coming 12-24 months, but it is not enough to boost economic growth to a higher level. Local drivers of growth remain weak.
Household consumption in Russia still faces a risk of decline as disposable income is under pressure; investments have also dropped from 20-25 per cent of GDP in 2006-2007 to 10 per cent of GDP in the first quarter of 2009.
Even if the external environment improves, Russia has to deal with the crisis of its consumption-based model, which no longer functions well.
Yaroslav Lissovolik
Chief economist
Deutsche Bank
We are starting to recover and the worst of the crisis is behind us. I think an important issue will be household consumption because this is the segment of the economy that is most important to the population and we are yet to see most of the growth in that segment.
But, I do think there are some positive drivers of household consumption, specifically a relatively stable rouble and higher budget outlays that will support the economy more generally. A lot of these outlays will be in the social sphere so will benefit the consumer. But the crisis is not over because some of the problems with the decline in earnings and wages are still going to be felt. However, some green shoots are already evident.
Vladimir Osakovsky
Economist
Unicredit
The definition of recession is technical (two consecutive quarters of decline) and technically speaking the recession seems to be over. The economy is set to receive a large fiscal boost, while demand for exports in China and Europe is recovering and interest rates are falling. As a result, we are already seeing positive developments in parameters like industrial output, investment, cargo turnover etc.
However, the economy is unlikely to reach pre-crisis peaks for at least another year or so, as key economic drivers such as private demand continue to deteriorate and are likely to stay weak for a while. Overall, we are moving from expectations of immediate collapse to a normal recession - it is a technical improvement, but nonetheless a continued crisis.
