Russia predicts further slump, sees recovery next year

The Russian government expects the economy to shrink 10.2 per cent in the first half of 2009 and by another 6.8 per cent in the second after exports plummeted and companies depleted stockpiles during the global slowdown, the economy ministry said. However, it expects a turnaround in 2010.

The government has revised its May forecast for an 8 per cent contraction. Gross domestic product probably fell 10.2 per cent in the first six months and may slump 6.8 per cent in the second half, the Moscow-based ministry said in its forecast for the next three years. Exports tumbled 47.4 per cent through May, it said.

The world's biggest energy supplier is sliding into its first recession in a decade after the global financial crisis sapped demand for its oil and natural gas and investors fled the country.

"The drop in external demand remains one of the reasons for the intensive decline," the report said. The economy will start recovering in the second half as exports increase, companies begin replenishing inventories and consumer demand stabilises, according to the document on the government's website.

Capital investment may slide 21 per cent this year as power generators and energy companies, which account for about a third of total investment, cut spending, the report said. The ministry predicts oil prices to average $54 a barrel in 2009.

Industrial production may shrink between 11 per cent and 13 per cent as manufacturing slumps as much as 17 per cent in 2009, the ministry said. The average annual inflation rate will be between 12 per cent and 12.5 per cent in 2009, dropping from last year's 13.3 per cent.