Rus­sia PM es­ti­mates econ­omy shrank 2% in year’s first quar­ter


Prime Min­is­ter Dmitry Medvedev on Tues­day es­ti­mated that the Rus­sian econ­omy shrank by 2 per­cent in the first quar­ter due to sanc­tions pres­sure and low oil prices.

If con­firmed, that would be the first quar­terly con­trac­tion since 2009. Medvedev warned law­mak­ers the sit­u­a­tion could worsen fur­ther, in con­trast to Pres­i­dent Vladimir Putin, who said last week the worst of the eco­nomic cri­sis had passed.

“Neg­a­tive trends con­tinue this year” fol­low­ing the cri­sis of the ru­ble na­tional cur­rency in late 2014, said Medvedev while pre­sent­ing a gov­ern­ment re­port to par­lia­ment.

“Be­tween Jan­uary and March, GDP con­tracted about 2 per­cent.”

Last year the Rus­sian ru­ble col­lapsed, send­ing in­fla­tion into dou­ble dig­its. Prices of food sky­rock­eted, ex­ac­er­bated by Rus­sia’s em­bargo on food im­ports from the Euro­pean Union.

On Fri­day the state statis­tics ser­vice said that in March for­eign trade was down more than 26 per­cent, while real wages fell 9.3 per­cent and in­fla­tion picked up by 16.9 per­cent com­pared with the same pe­riod last year.

Rus­sia’s cen­tral bank pre­dicted the econ­omy could shrink by as much as four per­cent in 2015 if oil re­mains around US$ 50 (NT$1,556) per bar­rel.

The crunch has forced the gov­ern­ment to dip heav­ily into its re­serves and pub­licly pon­der the sen­si­tive is­sue of rais­ing the re­tire­ment age for the first time since the 1930s.

An­a­lysts with the Higher School of Eco­nomics last week said that the shrink­ing of Rus­sians’ pur­chas­ing power will con­tinue for at least a year, ac­com­pa­nied by grow­ing un­em­ploy­ment and bankrupt­cies and a decline in so­cial wel­fare from bud­get cuts to health and ed­u­ca­tion.

25-bil.-Euro Loss

Medvedev said that the cri­sis robbed Rus­sia of bil­lions of eu­ros, but ar­gued that since it was brought on by West­ern sanc­tions im­posed over Rus­sia’s an­nex­a­tion of Crimea, it could not be avoided.

Rus­sia last March an­nexed Ukraine’s Black Sea penin­sula af­ter de­ploy­ing spe­cial forces there and over­see­ing a con­tro­ver­sial ref­er­en­dum that sup­ported Moscow.

“Adding on Crimea af­fected our econ­omy,” Medvedev said. “Ex­perts say that the over­all dam­age to Rus­sia was 25 bil­lion eu­ros (NT$831.6 bil­lion), that is 1.5 per­cent of the GDP, and in 2015 it could be sev­eral times that.”

But the de­ci­sion to an­nex Crimea was “the only one pos­si­ble, and we all ... sup­ported it, know­ing the pos­si­ble con­se­quences,” said the prime min­is­ter.

He said “in terms of in­ten­sity, the lat­est wave of sanc­tions could be the strong­est” that the West had im­posed on Moscow in ei­ther the Soviet or post-Soviet pe­riod.

“Look­ing at the sit­u­a­tion as a whole, it is sta­bi­liz­ing, but we should not have any il­lu­sions: th­ese are not just short-term cri­sis events,” he said.

“If ex­ter­nal pres­sure in­ten­si­fies and oil prices stay at ex­tremely low lev­els for a long time, we will be forced to de­velop in a dif­fer­ent eco­nomic re­al­ity which will fully test all of us.”

“Ev­ery coun­try’s his­tory has a mo­ment from which be­gins a new era,” he said.

“Clearly 2014 be­came this for mod­ern Rus­sia,” he said, com­par­ing the sig­nif­i­cance of Crimea to the fall of the Ber­lin Wall and the re­uni­fi­ca­tion of Ger­many.

“Un­prece­dented po­lit­i­cal and eco­nomic pres­sure is pay­back for our po­si­tion,” he said.

“Could our coun­try have avoided this eco­nomic sce­nario? The an­swer is sim­ple: it could not.”


Rus­sian Prime Min­is­ter Dmitry Medvedev, fore­ground, de­liv­ers his an­nual re­port to law­mak­ers in the State Duma (lower par­lia­men­tary cham­ber) in Moscow, Rus­sia on Tues­day, April 21.

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