OECD slashes Russia's 2009 GDP forecast to +2.3% from +6.5%
 MOSCOW (Dow Jones) -- The Organization for Economic Cooperation and Development said Tuesday that it has slashed its forecast for Russian gross domestic product growth in 2009 by almost two-thirds to 2.3% due to falling oil and metal prices and a decline in international capital markets.
Previously the OECD forecast 6.5% GDP growth in Russia's next year. The OECD said in its twice-yearly economic outlook that it was leaving its GDP forecast for 2008 unchanged at 6.5%.
"With a reversal in the substantial rise in oil and metal prices, the pattern of terms of trade gains fueling rapid growth in domestic demand has come to an end," the organization said in its report.
The organization also said economic growth should pick up in 2010 forecasting GDP of 5.6%.
At the same time, the OECD has trimmed its forecast for Russian 2009 inflation to 7.5% from 10.0% previously, saying the recent falls in energy and food prices and the slowdown in money supply and economic growth are likely to ease pressures.
The Organization warned that while the efforts of monetary authorities to use the country's vast gold and foreign exchange reserves to counter the effects of short-term speculative capital outflows on the ruble rate have been justified, the authorities shouldn't overspend them as that will only postpone Russia's necessary macroeconomic adjustments to market conditions.
Russia's gold and foreign exchange reserves - the world's third-largest - have declined $144 billion since their $597.5 billion peak in early August - as the central bank has dipped into them heavily to defend the currency from shedding value.
The OECD praised the Russian authorities for their "vigorous action" in protecting the banking system and corporate and financial markets stability amidst the current global financial turmoil, but said Russia should exercise fiscal discipline while dispensing its anti-crisis aid.
"The scale of the response (announced liquidity support measures are around 14% of GDP) suggests that vigilance will be needed to prevent accommodating misallocation of resources, which could rekindle a renewed upsurge in inflation when credit growth resumes," the organization said in its report. "Renewing efforts to step up long-needed structural reforms would strengthen growth and bolster confidence."
The Kremlin's anti-crisis package has amounted so far to more than $200 billion to aid the country's financial markets.
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25.11.2008 15:35
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