Economics

Unemployment Finally Impacts on Russia's GDP

The last GDP figures for Russia for the 2nd quarter show a surprise drop of 11%. This is mainly due to the impact of unemployment, which has reduced consumer demand as well as a reduction in bank lending. Another reasons experts give is the lack of impact that the government stimulus programme which was only agreed 2 months ago. This ends a 10 year expansion of the Russian economy which averaged a 7% annual increase. As a result of the GDP figures, the Russian Rouble weakened to 32.2 to 1 dollar or 45.5 Roubles to the Euro.

Many economists believe that during May-June 2009, the Russian economy reached the bottom of the recession and expect future figures to look better. Others, however, believe that the Russian government did not do enough to diversify the economy from commodity sales between 2000-08 and as a result, the Russian stock exchange and currency shows a very close correlation with the price of oil. Thus, the recovery of the Russian economy is highly dependent on the perceived demand for energy. Government revenues could be cut by up to one third due to the falling demand in commodities.