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8 Sep, 2009 08:21

Russian economy past worst of recession - minister

Russia's economy is through the worst of the financial crisis and is on the road to recovery, according to the country's minister for economic development.

Russian GDP could grow 3.9%-4.5% in the second half of this year compared with the first half, Elvira Nabiullina said at a meeting with Russian Prime Minister Vladimir Putin.

The Russian economy is showing positive signs, “which gives us hope that our country has already gone through its lowest economic point this summer and is now improving,” she said.

The minister underlined that it is important to continue in this positive direction.

”Such developments are in line with the global economic trend which has been improving since July this year, with a positive forecast for 2010,” Nabiullina said.

As for numbers illustrating the positive trend, unemployment in the country has been reduced to 2.11 million and there are more jobs available. Nabiullina said Russia had zero inflation in August this year, for the first time since August 2001. Also, industrial output grew 2.6% in May-July. Month-on-month investment growth in July was 0.3% and that was the first month of positive investment growth in 2009.

Nabiullina’s counterpart – Finance Minister Aleksey Kudrin – agrees that the worst of the crisis is most likely behind the country. However, he said, there is still a lot to be done on the road to recovery.

“Our estimate is that July’s and August’s figures suggest that in the third quarter of this year we’ll see a GDP increase in comparison to the second quarter. It means that we are overcoming the recession. Accordingly, the trend is good,” he said.

At the same time, he added, “there are many risks that have emerged in the world economy, which in my opinion, and in our opinion, have not been settled yet.”

“At the moment nobody can say whether they will cause further recession or when they will be solved,” Kudrin said.

He added that Russia's economy will return to pre-crisis levels in late 2012.

According to Stanislav Ponomarenko, the head of the Analytical Department at ING Bank, it is too early to assume that Russia is on a sustainable path to recovery.

“We still do not see much improvement in domestic demand, wages are declining, and private consumption is not improving much. So, we think that some stabilization is ahead but, in order to expect strong recovery, we should have some signs of domestic demand rebound,” is his view of the situation.

As for ordinary people, it seems that they are a lot more optimistic as well, and there is less crisis talk. Russians are starting to spend more, go on holidays, take mortgages and go back to normal, pre-recession life.