23 Jun 2009 18:18

Russian economy contracts 11% in May, 10.2% in five months

MOSCOW. June 23 (Interfax) - Russian GDP declined 11% in May 2009 compared to May 2008, Deputy Economic Development Minister Andrei Klepach told journalists on Tuesday.

The economy contracted 10.2% in January-May 2009 compared to the same period of 2008.

Taking into account seasonal factors, GDP edged down 0.5% in May versus April.

Commenting on the forecast for Russia's economic decline in 2009, Klepach said lowering the decline to 6.8% for the year given the current 10% decline over the first five months would be "a heroic act for our economy."

As for the factors that led to the 11% decline in the economy in May, Klepach said the Russian economy has had a harder time attracting investment. Investment fell 23.1% in May and 17.7% in January-May. With seasonal factors, investment fell 8% in May compared to April.

In addition, construction contracted 21.9% in May compared to May 2008 and 5.9% versus April taking into account seasonal factors.

"The slump came to an end in retail taking into account seasonal and calendar factors. [Retail sales] remained virtually unchanged in May compared to April, although they fell 5.6% compared to May 2008," he said.

"It's the classical profile of a crisis - investment falls, reserves shrink, but the decline in the consumer demand bottomed out faster than everything else," he said.

Industrial production tumbled 17.1% in May 2009 versus the same month of 2008, but edged up 0.5% compared to April 2008. "Positive signs from external markets are leading to increased output, but the decline in domestic investment demand is having a strong impact on sectors connected with machinery and equipment," he said.

"The economy is close to the lowest point of its contraction. In several sectors close to the global situation, a revival has been seen and exports can be expected to grow, but the sectors tied to investment demand are showing a major decline. The effect of the anti-crisis measures is only starting to be felt and the main impact will be seen in July and the second half of 2009. Time is needed to influence production," he said.

No signs of an increase in lending to the real sector are being seen, although access to loans has increased somewhat, he said.