Russia is clearly emerging from a bitter recession, its finance minister has declared, even as the latest industrial output data showed the country is still far from a full recovery.
One year after the onset of a crisis that hammered Russia's once-booming economy and showed up structural flaws, Finance Minister Alexei Kudrin said on Tuesday Russia was "without doubt" starting to emerge from recession in the third quarter.
"June was the first month of Russia's exit from the crisis. But the full start of our exit from the recession will be in the third quarter," Kudrin said.
"Today we have no doubts about this," he said following a meeting of finance ministers from former Soviet states.
Russia failed to implement significant economic reform during boom years that saw stellar growth of 8.1 per cent in 2007 and has been hit much harder by the crisis than most other developing economies.
The Russian economy shrank by 9.8 per cent in the first quarter compared to the same period last year and, according to preliminary data, by 10.9 per cent in the second quarter.
"For Russia this year has been a difficult period," Kudrin admitted.
Shortly afterwards, the state statistics office announced that Russian industrial production plunged 12.6 per cent in August from the same month in 2008, worse than market consensus predictions of 10.5 per cent.
On a month-on-month comparison, August's industrial output fell 3.0 per cent from July.
Officials had warned to expect bad figures, partly due to the deadly disaster at Russia's largest hydroelectric power station in southern Siberia in August that hit factories in the area with power outages.
One of the sectors worst hit in August was the vehicle industry, where production fell 84.9 per cent year-on-year and output of lorries plunged 74.7 per cent.
President Dmitry Medvedev admitted that authorities had underestimated the depth of the crisis, saying that the economy was set to contract 8.5 per cent this year compared with initial predictions of a 1.0 to 2.0 per cent fall.
"The depth of the fall is considerably more serious and this of course creates problems for us," Medvedev told members of an elite discussion forum in Moscow.
But he added: "In all, despite the quite complicated situation, the mood of the country is quite calm."
The outbreak of the financial crisis caused investors to take billions of dollars out of Russia to safer havens, slashing the value of the ruble against the dollar and causing huge losses on the stock market.
The crisis sparked memories of the 1998 meltdown that brought the Russian economy to its knees, but the government has been keen to claim that its anti-crisis measures have averted the worst.
Kudrin said the economy had grown by 0.4 per cent in June compared to May, and by 0.5 per cent in July from June, asserting that that Russia had been one of the first countries worldwide to emerge from the crisis.
"The measures taken (by the government) have allowed Russia to be among the first countries to emerge from the crisis," he added.
But Kudrin also warned that "it would be wrong to relax," saying that the large number of bad debts in Europe, the United States and also in Russia could still cause problems.
He said that the government would continue to inject cash into the Russian banking system in case the fears of further risks are realised.
Despite the government's confidence, economists have warned the crisis has done nothing to make Russia change its reliance on hydrocarbon exports which makes it dangerously vulnerable to swings in the oil price.
AFP
