And now for some good news about the Russian economy…

 

A few entries ago, I noted that Radio Europe correspondent Chloe Arnold predicted the Russian economy would actually weather the economic storm better than Western Europe and the United States. Turns out, he was right.  

 

Compare the U.S. economy’s recent GDP growth during and that of the Russian economy, and Russia’s comes out ahead. The Russian economy grew 2.2% during the fourth quarter of 2008, according to its official state figures, while the E.U. and U.S. economies made respective contractions of 1.1% and -6.2%.

 

Moreover, while all three economies are likely to have it rough in the year ahead, Russia’s economy should have it the least rough. That’s according to the International Monetary Fund, whose World Economic Outlook projects Russia’s economy contracting -0.7% in 2009 before rebounding 1.3% in 2010. By comparison, the agency sees the U.S. economy contracting another -1.6% in 2009 before rebounding by an only marginally higher 1.6% in 2010; it sees the E.U. economy slipping a full -2% this year and making a meager comeback of .2% next year.  

 

That Russia would have better GDP numbers shouldn’t be too surprising. It’s been leading the pack on this indicator for a few years now. These GDP growth percentage numbers, also from the World Economic Outlook, say as much: 

 

             2007           2008
European Union 2.6 1
Russia 8.1 6.2
United States 2 1.1

 

There’s clearly a benefit to being a petroleum-based economy in an era of high -and growing- energy demand. It helps also that, as the World Economic Outlook further notes, lower spending in most economies is going to decrease worldwide economic inflation 5.25% this year and 5% next year. Out-of-control inflation was a tremendous drag on Russia’s fledgling economy during the 1990s, when the ruble reduced to 1,200th of its original exchange value within the 12 months of calendar year 1998. Russian banks had a momentary inflation scare again last month, with the ruble dipping to an emergency-level exchange value of 41 against the dollar and creditors subsequently going into panic. Not having to worry about this problem, at least, can only be a change for the better.  

 

That’s not to say that there are a lot of more specific indicators that would give any sane Russian cause for alarm: the ruble is still only about 28 to the dollar, Russia’s uneployment rate is higher, its stock market’s 70% drop last month far exceeds any ups and downs of the Dow Jones, investment in fixed capital is lower, and exports and productivity are not even close to those of the U.S. economy.

But the overall picture is not as bleak as some might have you think.

 

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