Russia out of recession as economy grows in Q3 | business | Hindustan Times
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Russia out of recession as economy grows in Q3

business Updated: Oct 26, 2009 22:53 IST

Russia technically emerged from recession in the third quarter after official data on Monday showed economic activity grew 0.6 per cent from the previous three months _ the first quarterly rise since the crisis struck a year ago. Despite the increase, gross domestic product was still 9.4 per cent below year-earlier levels, underscoring the amount of damage the recession and lower oil prices have wreaked on Russia's economy .

The Economic Development Ministry said that in the month of September, GDP fell 8.6 per cent on the year, less that the 10.5 per cent contraction in August.

The improvements were due to less capital outflow and to companies replenishing their stocks, the ministry said, which bolstered belief that the country is now past the worst of its downturn.

The ministry has forecast a 8.5 per cent fall in GDP for all of 2009.

Industrial production grew 5.1 per cent during September, according to the Federal Statistics Agency.

Russia's economy, weathering its first economic downturn in a decade, has been supported in recent months by rising oil prices, which hovered around $80 per barrel on Monday. The Russian ruble has gained some 10 per cent of its value against the dollar since early September on higher crude prices and a further weakening of the American currency.

Manufacturing and agriculture have been the main industry drivers, statistics show, with a big harvest boosting agricultural activity by 10 per cent.

Retail and construction, however, are still weighing on the economy. Retail shrank by 9.9 per cent on the year in September and was down 0.7 per cent against August.

Analysts hailed the moderate growth but expressed concern over weak retail sales and consumer demand.

"We need high consumer demand for the GDP to rise year on year, " said Yevgeny Nadorshin, chief economist at the Trust investment bank. "There are still no signs that the demand is picking up. This could complicate the overall recovery."

Observers widely expect the government to post encouraging statistics in October, including some year-on-year economic growth, since October 2008 was one of the worst months for the Russian economy in a decade.