Russia faces $15 billion heatwave losses: EconomistsIndia
The Times of India
Russia is starting to count the losses of the worst heatwave in its history, with economists warning the weather may cost the country up to 15 billion dollars and undercut a modest economic revival.
While it may take months for the government to tally the damage caused, several economists said the disaster might cost Russia between 0.5 percent and 1.0 percent of this year's gross domestic product (GDP), or roughly 7-15 billion dollars.
Alexander Morozov, chief economist for HSBC bank in Russia, said the abnormal heatwave, including a severe drought, forest fires and smog, will be a significant factor eroding growth as Russia recovers from the economic crisis.
"Economic growth in Russia is slowing and the heatwave will lead to a further slowdown," Morozov told AFP, estimating the immediate losses from the fires and the smog at 1.0 percent of this year's GDP, or around 15 billion dollars.
That number covers immediate losses in the agriculture, industrial and services sectors and does not take into account any indirect losses that would stem from a spike in deaths and illnesses, he said.
The International Monetary Fund said this month that a recovery in Russia from deep recession remained fragile but appeared to be gaining momentum, putting this year's growth at 4.25 percent and 2011 at 4.0 percent.
The Russian economy contracted a very sharp 7.9 percent last year as key energy exports were hit by the global economic slump, sending the country into a painful reverse after years of buoyant expansion.
Several leading Russian industrial firms have shut down production during the heatwave to spare their workers the high temperatures, sending them on vacation.
Many Russians lay the blame for the disaster on the government but the authorities have rejected criticism that they were poorly prepared.
"You know full well that the weather is absolutely abnormal and people, authorities cannot entirely control this even if they display the highest level of thoroughness," President Dmitry Medvedev said this week.
Moscow authorities acknowledged for the first time on Monday that due to the heatwave the city's daily mortality rate had doubled and morgues were overflowing with bodies.
The federal government has yet to confirm that statistic.
Worst hit has been agriculture.
"The drought will likely cause a 30-33 percent drop in the grain harvest -- mostly wheat -- this year. Other agricultural goods get adversely affected too," Morozov said.
Prime Minister Vladimir Putin on Monday slashed forecast for the wheat harvest by a third to 60-65 million tonnes after shocking international markets last week by announcing that from August 15, grain exports would be banned so as to keep prices down at home.
Vladimir Tikhomirov, chief economist at Uralsib, also estimates that if the heatwave does not subside by late August, the economic losses may be between 0.5 percent and 1.0 percent of this year's GDP.
"But that's the worst case scenario," he said, saying economic activity would still pick up later in the year.
The noxious smoke has forced Russians to flee the capital en masse and aviation officials said more than 100,000 people left Moscow by air on Sunday alone -- a record number for the current year.
Economists said it was too early to estimate the long-term losses but admitted they could be big. The drought is likely to boost inflation further by squeezing the supply of agricultural products, they said.
"Indirect losses may be significantly larger," Dmitry Polevoi, a Moscow-based economist with ING Bank, said.
"We have raised our year-end inflation forecasts for 2010 and 2011 to 8.5 percent and 9.5-10 percent ... from 6.8 percent and 7.6 percent before," he wrote in a note to clients.
The Russian anti-monopoly service meanwhile said it was looking into reports of sharp rises in the prices of ventilators and air-conditioning equipment as people try to keep cook in the heatwave.
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