The recent economic development in Russia has been positive. Low costs for international investment has stimulated the inflow of foreign capital, which has improved the liquidity situation according to the Swedish bank, Swedbank's analysis.
An expansionary monetary and fiscal policy reduces the impact of the downturn of the economy, but it also involves new risks.
The growing budget deficit will be difficult to reverse and the domestic demand will be affected by weak corporate balance sheets, increasing unemployment, lower real wages and a continued weak financial sector.
Swedbank increases, however, their growth prognosis for 2010 to 4.3% from 1.5% in the light of a rising oil price, a cover of the stock cycle and the economic stimulus packages.
For 2011, they expect the economy to grow by 4.5%, largely as a result of continued high oil prices. The recovery will take time unless major reforms are implemented to reduce imbalances in the financial sector and, in the medium long-term, improve competitiveness and productivity in the Russian economy.
Households have been better off since mid-2009. Although the labor market statistics is instable, unemployment seems to decrease. The unemployment rate is reported to have fallen from 9.2% in first quarter of 2009 to 7.6% in the third quarter.
Private companies have been hit hard by reduced demand and increased borrowing costs. After a sharp decline in output and employment, the government has increased aid through direct subsidies and capital or through loans from banks.
The Russian authorities have succeeded in their efforts to stabilize financial markets and the banking sector, but a tightening in early 2009 most likely deepened the crisis.
Recovery on global energy markets and an increased influx of capital combined with an expansionary fiscal policy will result in an increased activity in the Russian economy in 2010.
Cecilia Helland