Russian economy shrinks almost 8 per cent in 2009 | business | Hindustan Times
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Russian economy shrinks almost 8 per cent in 2009

business Updated: Feb 01, 2010 16:49 IST
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Russia's economy contracted 7.9 per cent in 2009, statistics showed on Monday, after the economic crisis abruptly ended years of strong growth in the country and showed up its failure to implement reform.

However amid brightening prospects for the economy going into 2010, the figure was slightly better than predicted by the government, which had been forecasting an even worse contraction of 8.5 per cent.

Economic growth in Russia in 2008 amounted to 5.6 per cent but the economic crisis was already slamming the brakes then on several years of high Russian growth that had been fuelled by soaring energy prices.

Economists have said that Russia has been paying the price for failing to reform and diversify its hydrocarbon-reliant economy during the good times and is still highly vulnerable to any oil price shocks.

Among the sectors worst hit in 2009 was the construction sector, which contracted 16.4 per cent in the period, the statistics office Rosstat said in a statement.

Also badly affected was the hotel and restaurant sector, which shrank 15.4 per cent. A quarterly breakdown was not immediately available.

According to a report in the Russian daily Kommersant on Monday, the average price of a hotel room in Moscow fell 36 per cent in 2009 from 2008 to 267 dollars, the first such fall in years.

President Dmitry Medvedev has in the last months admitted that Russia suffered worse than other countries from the crisis due to the failure of the authorities to change its economic model over the last years.

He has called for the country to embrace far-reaching economic reform over the next years but analysts have criticised him for being long on rhetoric and short on concrete actions.

Most economists expect Russia to return to modest growth in 2010 but caution that this will be largely a base effect from the weak performance in 2009 and it will take years for the country to return to pre-crisis growth levels.