AS Macro: Extreme weather hits Russian economic growth

This BBC news article explains how extreme weather conditions in Russia this summer is hitting GDP growth.

The Russian economy has always been sensitive to changes in the world prices of commodities such as oil and gas (two major exports). In this sense, Russia is more exposed than the other BRIC nations to a double-dip recession in the developed world leading to declines in commodity prices.

And now an extreme heatwave, which caused a severe drought and wildfires has destroyed crops, has hit export revenues and led to a rise in consumer price inflation. The drought has destroyed over a quarter of the country’s grain crop.

The soaring price of fooder for cattle has led to many smaller dairy farmers slaughtering their cattle. And demand for agricultural machinery has also slumped.

Overall, the drought and fires are expected to but annual economic growth in 2010 by at least 0.8 percentage points.

For a wider perspective on prospects for the Russian economy, this FT blog is fascinating: Is Russia the best Bric after all?

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