Russia's downturn worsens as GDP further drops in Q2

Russian government may downgrade its forecast for economic growth this year following a sharp drop in the GDP in the second quarter, Russian Minister of Economic Development said Tuesday.

Statistics from official Rosstat agency show that Russia's gross domestic product in the second quarter has decreased by 4.6 percent, a sharp drop compared with 2.2 in the first quarter and also worse than the preliminary government forecast of 4.4.

"The latest data could force the government to downgrade its forecast for 2015," Alexei Ulyukayev, the Economic Development Minister, was quoted by RIA Novosti news agency as saying.

"This is a matter of concern," he said, adding that the ministry's official GDP forecast for 2015 is a 2.8-percent contraction.

However, the minister believed that the GDP dynamic could improve in the third quarter and even climb above zero mark in the fourth.

The accelerating drop in the Russian GDP has been connected with optimistic forecasts made by the ministry, the Western sanctions and the slump of global oil prices, Andrei Gorodetsky, deputy director of the Economy Institute of the Russian Academy of Science, told Xinhua.

"Now we reap what we have sown in the last 25 years and, especially, in the last three to five years. These are the (Russian economic) system's structural problems," he said.

According to the expert, unless the Western sanctions are softened and the Russian government implements serious incentives for investors, Russia's economic growth will be further suppressed. Endi