The Russian Collapse: Well, That Didn’t Take Long

On the evening of February 23rd I suggested here that the Russian economy was on the verge of collapse (see below).  On the morning of the 25th, the front page of the FT came out with the story, based on figures released the night before, showing an 8.8% unexpected drop in GDP (join the club, as the U.S. revises downward for Q4 into the minus 6.6 range).  But Russia is not like the U.S., as I pointed out, and I think faces much more difficulty than we do.

Other figures on the sudden change in Russian economic well-being are even more disturbing. 

The story lead is:

Russia’s gross domestic product contracted by 8.8 per cent year-on-year in January, Russia’s economy minister said yesterday.

This was a sharply lower figure than many had expected, indicating that Russia’s economic downturn may be much deeper than previously thought.

The economy ministry predicts that GDP will contract by 2.2 per cent in 2009, but following the January drop, this forecast “is looking very optimistic”, said Chris Weafer, a strategist at Uralsib, the Moscow investment bank.

“If this is the darkness before the dawn, then today’s number confirms the darkness, while the dawn remains an aspiration.”

For the whole story, click here:

Sometimes these calls take a year to come to pass, and sometimes they just take days.