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Russias Top Economist Needs to Face Reality

Published: October 24, 2008 (Issue # 1419)


On Friday, the government reported that growth in gross domestic product for September slowed to 0.4 percent. On Monday, however, Prime Minister Vladimir Putin claimed that Russia, Brazil, India and China will remain the locomotive of the world economic growth for the next few years.

On Sept. 3, I wrote in this column, A sudden zero growth would not be surprising, and leaders like Putin are not prepared to face reality. Now zero growth has already been achieved but Putin remains in denial, even though as prime minister he is the chief economist in the country.

In fact, Russia will be lucky if it faces nothing worse than stagnation. A substantial decline in GDP next year is an acute possibility. Do not believe all these forecasts that as recently as a month ago predicted 6 percent or 7 percent growth next year. Each forecast is lower than its predecessor. Let us instead discuss the forces at hand.

As elsewhere in the world, the Russian banking system has frozen up because of rising international interest rates and an elimination of trust. Central Bank Chairman Sergei Ignatyev said two weeks ago that he expected 50 to 70 banks to go under. Others fear more than 200 banks might collapse. That would keep the credit market frozen for quite some time and lead to a contraction of loans, regardless of what the Central Bank does.

The second blow has already hit real estate development, a sector that is particularly dependent on credit. Investment is still increasing, but the growth rate has declined to 8 percent from 24 percent during the same month a year ago in September. You can see for yourselves how many cranes are standing still at construction sites in Moscow, and most large real estate and construction companies are considered to be on the verge of bankruptcy. Their stock prices have fallen 82 percent this year. If construction is halved, that alone would reduce GDP next year by nearly 3 percent.

The third strike has hit commodity prices. Since their admittedly brief, sharp peak in July, both steel and oil prices have halved because of the sudden slowdown in the world economy. In addition, energy production is already stagnant, and export volumes are declining. Russias crude oil exports fell by 5.9 percent during the first eight months this year. Steel exports are set to plummet, as China has turned from a steel importer to a major exporter. Domestic demand will decline with construction. Commodities, which represent roughly a quarter of Russias GDP, cannot possibly expand next year. But they may contract somewhat, especially steel production and construction materials.

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ALL ABOUT TOWN

Wednesday, Oct. 1


The St. Petersburg International Innovation Forum 2014 kicks off today at Lenexpo, where it will be presenting the latest and greatest ideas until Oct. 3. Focusing on economic development and the decisions and measures necessary to encourage development in Russias most important industries, the event is a possibility to discuss the innovations currently available in a variety of fields.


Representatives of the Russian and international media industries arrive in St. Petersburg for the first ever International Media Forum being hosted by the city until Oct. 10. With a variety of events on tap, including workshops, lectures and film screenings, the event plans to reemphasize the citys reputation as the countrys culture capital and as an emerging market and location for the visual arts.



Thursday, Oct. 2


The celebration of the bicentennial of the birth of Mikhail Lermontov continues with todays free exhibition in the citys Lermontov Library at 19 Liteiny Prospekt. Titled Under the Rustling Wings, the temporary exhibition will feature the costumes and scenery used in the 1917 production of Lermontovs play The Masquerade, which he wrote in 1835 when he was only 21 years old.



Friday, Oct. 3


Learn more about how to manage and evaluate employee performance during SPIBAs Human Resources Committee meeting this morning on Employee Assessment: Global and Local Trends. Starting at 9:30 a.m., the discussion will touch on such topics as the partnership between HR and business, reliable assessment strategies and more, with Tatiana Andrianova, the head of the SHL Russia and CIS branch in St. Petersburg, as the featured guest. Confirm your participation by Oct. 2 by emailing office@spiba.ru or calling 325 9091.


AmChams Procurement Committee Meeting is at 9 a.m. this morning in their office in the New St. Isaac Office Center on Ulitsa Yakubovicha.



Saturday, Oct. 4


Wine and cheese lovers will get their chance to revel during Scandinavia Country Club and Spas Wine Market Weekend. Going on today and tomorrow, wining diners can listen to live music, take part in culinary classes and, of course, sample a variety of fine wines from around the world. The cost of admission is 400 rubles ($10.30) for adults and 200 rubles ($5.15) for children.



Sunday, Oct. 5


Look for the latest fall fashions at the Autumn Market today in Freedom Anticafe at 7 Kazanskaya Ulitsa. The minimarket plans to offer clothes more flattering than the puffy jackets that are a staple of the citys cold-weather fashion, while offering the same amount of protection from the biting winds blowing off of the Baltic.



Monday, Oct. 6


SKA St. Petersburg, the citys KHL affiliate, welcomes Slovakian club HC Slovan in a match-up tonight at the Ice Palace near the Prospekt Bolshevikov metro station. The puck drops at 7:30 p.m. and tickets can be purchased on the clubs website or in person at either the arenas box office or the clubs merchandise store on Nevsky Prospekt.



Tuesday, Oct. 7


Learn more about Russias energy industry at the St. Petersburg Energy Forum that begins today and runs through Oct. 10. Attracting industry experts and political and business representatives, the forum plans to welcome more than 350 plus companies and their representatives to discuss the future of Russias largest economic sector.



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