Today Russia's Economic Crisis

On 30 April the internet site gazeta.ru published an article by Andrei Illarionov, former economic advisor to the President. The title "A leap backwards" speaks for itself. The article shows that industrial production fell to its lowest point in February this year, a fall of 23.4% from the peak in December 2007.

In April the Federal Service of State Statistics' index of industrial production showed a further deterioration, a fall of 16.9% by comparison with the previous April. This was the most significant fall since February 2009 - 16%. It was also the biggest fall since production fell by 18% in 1994. Between January and April industrial production fell by 14.9% by comparison with the same period in the previous year. Although March saw a growth of 11% over February, there was a further fall in April of 8.1%.

Mining production figures remained unchanged between March and April at 11.8%. There was a slight increase in the production and distribution of electricity and gas.
As for manufacturing, there was a 20.8% fall in March by comparison with the previous year, and the April figure was 25.1%. The headlong downward spiral in manufacturing has continued and has spread to the production of gas and steam turbines, which fell in April by 60.1% and 90.1% respectively.

A preliminary report on fluctuations in GDP from the Russian Ministry of Economic Development for the first quarter suggests that there has been a decline of 9.5%. It is clear from this report that Russians have not yet felt the full force of the crisis. Real incomes and salaries have only fallen by 2.3%. Turnover in the retail sector has decreased by even less, and activity in the service sector has fallen by 1.5%.

However, the prospects are far from rosy. In previous years the main engines of growth were wholesale and retail trade, vehicle repairs and motorcycles, household goods and items of personal use. In 2009 the picture will be very different. The Ministry's figures show a decline of 6.1% in value added in the wholesale and retail sectors.

Thus, a review of the wholesale sector leads to the conclusion that the current comparatively comfortable situation in the retail and service sectors will not last long. The situation in retail did not look so bad in the first quarter of 2009 because of the rush to stockpile durables in expectation of worse times to come.

The situation in the labour market is serious. According to the International Labour Organization there were 7.5 million people unemployed in March 2009. This represents 10% of the economically active population. Furthermore, as the Ministry report shows, the number of unemployed is likely to increase if people who are now working part time, on down time or taking unpaid leave proceed to lose their jobs. As of 18 March this year the total number of such employees was 1.2 million.

Any review of the Russian economy and its problems, particularly employment, should bear in mind that the socio-economic situation of the country's many regions is very different. There are also many so-called "mono-industrial cities", where a single major enterprise provides employment to a large section of the population and life in the city depends on it.