Russia contracts 9.5 pct

Bloomberg

Gross domestic product shrank 23 percent from the previous quarter, the Federal Statistics Service said Friday, citing preliminary data.

While the first-quarter performance indicates Prime Minister Vladimir Putin’s stimulus plan was insufficient, investors are anticipating a recovery. The ruble rose 0.3 percent Friday, capping its 12th weekly advance, after crude oil rebounded and the central bank predicted a current-account surplus. The Micex stock index is up 62 percent this year.

"The big dip in industrial production jumps in your face," said Tatiana Orlova, a Moscow-based economist with ING Groep. "The government should be worried. It’s very easy to come up with headlines announcing bailout measures, but the situation shows that you have to adjust them. It’s hard to do these things fast."

President Dmitry Medvedev has criticized the work of the government this week, while Putin was on a trip to the country’s Far East, Japan and Mongolia. A $9 billion slate of guarantees aimed at kick-starting lending to the companies designated as strategic enterprises had "failed," Medvedev said on May 13.

On Friday, Medvedev poured cold water on the government’s bid to diversify the economy away from exporting oil, gas and metals. The average price of Urals crude oil in the first quarter of the year is 53 percent lower than in the year before period, at $44.08 per barrel.