Downturn highlights Russia’s need for diversification
November's industrial collapse was five times more than an economists' poll predicted. Refocusing their crystal balls, December's slump is now expected to be 19% year-on-year, and the first half of 2009 even worse according to Yaroslav Lissovolik, Chief Economist at Deutsche Bank Russia.
“We should be surmounting the depths of these difficult times in the middle of next year.”
Biggest fallers were the three pillars which make up 80% of Russia's economy – oil, gas and metals. Professor Ismail Erturk of the Manchester Business School says this is a wake-up call to the Kremlin.
“Relying on those industries is not enough, you always need innovative sectors where you have high value added.”
But Yaroslav Lissovolik says economic diversification is easier said than done.
“It takes not even years, it takes decades to diversify for an economy that is so dependant on export of raw materials.”
Finance Minister Aleksey Kudrin admits Russia is now heading for recession – two successive quarters of negative GDP growth. His Deputy Andrey Klepach says it'll last more than two quarters, and has already started.