Economic worst avoided with much still to do
It was a bad year, but not as bad as many expected. The economy contracted by 8.5%.
But the decline in development brought one advantage, a marked slowing in the rate of inflation, which it a post-Soviet low of 9%. This allowed the central bank to dramatically cost lending rates.
Growth is expected to return next year at around 3.5 percent. And, as Prime Minister Vladimir Putin noted, more stimulus measures would be needed, although the focus might change.
“Most important will be our measures to support domestic demand, primarily in automaking and construction industry. The programme to pay for scrapping of used cars is to come into action in the first months of next year. This is worth up to 10 billion Roubles.”
The economy is clearly not out of the woods yet. And while President Medvedev praised the way the government had handled the situation, he saw no room for complacency.
“Even according to analysts, exit from the crisis will be very gradual. But it should be a true exit. We are going to work on the exit strategy continuing support of the sectors and factories that still will require it.”
With the price of oil nearing $80 per barrel – roughly 30% higher than projected in the budget – Russia has some space to manoeuvre. However this may have its disadvantages, as it also removes some of the urgency to diversify away from a resource based economy and modernize inefficient enterprises.