Russian GDP Drops .4 Percent in October

Russia’s Gross Domestic Product (GDP) fell for the first time in 10 years in October, the Kommersant newspaper reports, citing the Economic Development Ministry. Combined with other news released this week, including higher inflation outlooks and growing job losses, the data suggested that the Russian economy was heading deeper into a full-on economic crisis.

The Economic Development Ministry, which keeps track of monthly changes in GDP, revealed that Russian GDP fell .4% for the month, accounting for seasonal fluctuations. According to Minister Elvira Nabiullina, the major reason for the drop was a slowdown of industrial output, which fell by 2.4% during the month.

The World Bank and the Organization for Economic Cooperation and Development (OECD) have also slashed their estimates for Russia’s 2009 GDP growth. The OECD, which cut their estimate from 6.5 to 2.3%, said that falling oil and resource prices were to blame, as well as receding capital markets. Oil has dropped to around $50 per barrel, down from an all-time high of $147 in July.

Inflation outlooks were also being re-evaluated. Citing Rosstat, the Russian statistics agency, the RIA Novosti news agency reported Wednesday that consumer prices had risen by 12.3% since the start of the year. According to revised estimated by the Economic Development Ministry, the official yearly inflation figure will exceed 13%. Unofficial figures have pegged the metric at higher than 15%.

Russia’s job loss rate has also accelerated to its highest point in five years, with Rosstat reporting that 76,000 Russians lost their jobs in October.

Equally troubling was the collapsing public confidence in banks and financial institutions. Experts from Russia’s Deposit Insurance Agency, which insures bank deposits, estimated that between 5 and 7 percent of all deposits were taken out of banks in October. Final figures will be released by Russia’s Central Bank at the end of November.

According to Kommersant, some banks were starting to use schemes reminiscent of the 1998 default, when banks entering bankruptcy issued promissory notes instead of paying out obligations. While not technically illegal, the move was seen as problematic by some experts.

In responding to the financial crisis, Russian authorities were also burning through the country’s cash reserves. One sixth of the reserves have been spent in the past three months alone on efforts to prop up the rouble and support domestic companies, leaving the state with $475 billion.

As a whole, the economic cards seem stacked against Russia. By itself, each economic indicator would raise concern. Together, they likely spell increasingly hard times ahead.