RIA Novosti reports that the Russian economy contracted 8.8 percent year-on-year in January. That’s pretty bad, but in fact understates the steepness and intensity of the drop.
Consider the Russian economy was growing about 6 percent through August. So, normalizing January 2008 GDP to 100, in August GDP was approximately 104. Now, it’s 91.2. This means that the drop from August to January is 12.3 percent. Annualizing that gives an almost 30 percent per year rate of decline.
Economic Development Minister Elvira Nabiullina recently stated that the decline in January vs. December was 2.4 percent. Annualizing that gives a 25 percent per year annualized decline.
To put things in perspective, the Japanese economy contracted at a 12.7 percent annualized rate in the fourth quarter of 2008. The US economy contracted at a 3.8 percent annualized rate in the fourth quarter. UK GDP fell at a 6 percent rate in that quarter. For Germany, the figure is about 8 percent. For the entire Eurozone, about 6 percent. The OECD, 6 percent annualized. Canada–can’t forget Canada!–well, didn’t forget, but can’t say, because its 4th quarter numbers are not out yet. Ditto for Oz.
Given Nabiullina’s estimate of a 2.4 percent decline in January alone, it is heroic to put any faith in the government’s just revised estimate of a 2.2 percent drop in GDP for the entire year. Given that the budget is based on a 2.2 percent number, that the projected deficit based on that number is 8 percent of GDP, and Kudrin has said that the country cannot afford a deficit of bigger than 8 percent of GDP without sparking greater than 14 percent inflation–well, draw your own conclusions.
For those (not naming names;-) who still believe that Russia is not among the nations hardest hit the global economic crisis, The Professor has some extra credit homework for you;-) Find a country that has contracted more rapidly than Russia since August.
And, for those who persist in insisting that Russia is in better economic circumstances than the US, please choose a metric or metrics by which we can make the comparison. Hint: Don’t use GDP growth.
In brief, the Russian economic condition is dire.