Russian economy contracts 11% in May

MOSCOW (AFP) — The Russian economy contracted by 11 percent in the month of May compared with the same month last year, the government said Tuesday, in the latest blow to hopes of a swift recovery in the country.

Deputy economic development minister Andrei Klepach also said the Russian economy had shrunk by 10.2 percent in the first five months of the year and offered a bleak prediction for the year as a whole.

In light of the latest figures, "a contraction of only six percent in GDP (gross domestic product) in 2009 would mark a heroic achievement for the economy," Russian news agencies quoted him as saying.

The figures were the latest bleak data to emerge from Russia, where industrial production tumbled 17.1 percent in May from a year earlier, a far sharper fall than had been expected by analysts.

The Russian economy already contracted by an alarming 9.8 percent in the first quarter of 2009 relative to same quarter in 2008, and the government has warned the economy will shrink between six to eight percent this year.

The global slowdown has punished the failure of the Russian authorities to diversify the country's economy, which remains hugely dependent on exports of hydrocarbons and raw materials.

There have also been widespread fears of a "second wave" of the crisis due to the quality of banks' loan portfolios, but the government has insisted it has the situation under control.

Prime Minister Vladimir Putin's government has kept a watchful eye on the situation, fearful that a production slowdown could provoke social unrest in Soviet-style towns that are dependent on one industry for their livelihood.

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