Russia edged closer to a recession last month as half a million people lost their jobs and real wages and capital investment both fell for the first time in more than nine years, data showed on Tuesday.
December saw the first contraction in years of the once-buoyant economy, dented by weak oil prices, slowing global demand for key exports, investor flight from emerging markets and the drying up of international credit markets.
As Russia heads for its worst economic crisis since the 1998 default, officials have warned of the possible threat of public unrest if the economic situation worsens.
Companies have responded to a tougher global environment by slashing production, staff, wages and working hours. Companies that announced job cuts in late 2008 include real estate developers, technology company Sitronics, petrochemical firm Sibur and hydro-electric power producer Rushydro.
Others, such as coal miner Mechel, have cut working hours. The number of unemployed jumped by about 500 000 in December to 5,8-million, taking the unemployment rate to a two and a half year high of 7,7%.
Companies also slashed spending plans, and ordinary Russians started to feel the pinch. Capital investment and real wages both fell last month for the first time since 1999.
”The economy will be in for a painful adjustment this year, and we foresee a further stream of grim economic news in the coming months when the effect of the crisis is expected to become even more pronounced,” Ivan Tchakarov, economist at Nomura, said in a research note.
As inflation-adjusted wages fell ordinary Russians have become more cautious about spending habits, with year-on-year retail growth slowing sharply to a nine-year low of 4,8%.
”As household consumption has been the biggest contributor to the economic boom in the recent years, falling real wages and incomes should underpin negative growth readings in the first few months of this year,” ING economist Tatiana Orlova said.
Some of the key numbers from the data package were reported by Interfax on Monday, citing a source.
Russia’s Economy Ministry forecasts that the economy will shrink 0,2% this year if oil prices average $41 a barrel.
Prime Minister Vladimir Putin has vowed there will be no repeat of 1998 and the latest polls show his ratings remain high in a financial crisis stretching back to September. A key difference is Russia’s oil wealth saved up in recent years.
Russian authorities have already unveiled about $200-billion in measures to support the economy, and are expected to unveil a further 900-billion roubles in capital injections to commercial banks. — Reuters