Russia expects 8% drop in GDP this year

Russia's economy could shrink as much as 8 percent this year after dropping 9.8 percent in the first four months of 2009, a top economic official was quoted as saying by news agencies Tuesday. Officials had forecast that GDP would decline by 2.2 percent this year, but that estimate is due to be revised after the release of the latest economic figures. The International Monetary Fund has said Russia's GDP could drop as much as 6 percent this year — the most pessimistic outlook so far. Deputy Economic Development Minister Andrei Klepach said the economy contracted by 10.5 percent in April, Russian news agencies reported, contributing to the 9.8 percent drop between January and April. "The GDP decline (this year) will amount to 6 to 8 percent, under our estimates," Klepach said, according to state-run RIA-Novosti. "We are currently working to make the forecast more precise." He blamed the weakening economy on declining investment — down 15.8 percent in January-April — and industrial production, which slumped nearly 17 percent in April. Russia has experienced a sharp reversal of an eight-year economic boom fueled by high oil prices. The economy started to nosedive last fall after oil prices — the backbone of the energy-based economy — collapsed and investors pulled billions of dollars out of the country. President Dmitry Medvedev warned on Monday that the economy would perform worse than expected this year and the government would have to squeeze spending for the first time in years. Russia is about to redraft this year's budget to run a bigger deficit than previously forecast. Deputy Finance Minister Oksana Sergiyenko said Tuesday that the deficit could reach 9 percent or more — well above the previous 7.4 percent forecast. In monetary terms, that could come to 300 billion rubles ($9.4 billion), she added. Sergiyenko said the government, which now bases its forecasts on worst-case scenarios, expects the economy to be flat next year.