According to The World Bank, which released its Russian Economic Report after a very difficult year, the economy will grow by 3,2% in 2010.
2009 saw a sharp GDP contraction of 8,7%. As the Report describes “although repayment and rollover risks remain for the remainder of 2009, with the private sector having to pay off about USD33.2 billion in the fourth quarter of 2009 (of which USD10.1 billion by banks), we do not expect any major default of bank or corporate entities”.
“We saw signs of recovery from our Moscow based clients in the second half of 2009” says Massimiliano Ballotta, Managing Partner of Legalife, the LAWorld member for Moscow. “Tentative improvements in economic activity should continue” he says “partly supported by a revival of the global demand, oil prices and recovery of the global financial system”. In fact, the Russian economy returned to modest growth from a low base, by about 2 percent, in the third quarter of 2009 compared with the second.
The projected growth of 3,2% for 2010 would be achieved thanks to better conditions in the balance of payments (higher oil prices) and fiscal outlook. Clearly the World Bank warns of remaining risks associated with much weaker domestic demand (especially if compared to the pre-crisis time) and structural constraints (the Bank has long advocated the policy need to continue in the path of restructuring the economy, encouraging diversification to integrate an energy-based economy with more manufacturing and services). The Report also correctly states that “the new environment provides an opportunity to accelerate structural reforms that can raise productivity and diversify the Russian economy”.
Massimiliano Ballotta
Senior partner
LegaLife LLC