Russia: Signs of financial market stabilisation
Overview:
The World Bank has sharply downgraded its growth forecast for Russia in 2009 in its latest Economic Report to -4.5%, a larger economic contraction than the Russian government is currently expecting. The World Bank also outlines the magnitude of the government’s fiscal response to date, some 6.7% of GDP in total of actual and intended measures for 2008/2009. While this huge sum is readily financeable from the Reserve Fund, the World Bank notes that the government’s scope to finance further fiscal stimulus in this fashion are limited given the need to preserve some financial cushion. Despite dreadful macroeconomic data showing both a huge collapse in output and sharp increase in unemployment there are at last signs of stabilisation in Russian financial markets as the oil price rallies somewhat.