Crisis to cut Russian growth sharply: World Bank

MOSCOW: The global financial crisis is set to bring an abrupt end to years of strong growth in Russia and prevent more than a million of its people from escaping poverty, the World Bank warned on Tuesday.

The bank said it was slashing its growth forecasts for Russia to around six per cent in 2008 from 6.8 per cent previously, with 2009 down sharply at 3.0 per cent from 6.5 per cent.

"After a decade of high growth, the Russian economy is experiencing a slowdown in the wake of the global financial crisis," the World Bank said in its latest economic report on Russia.

Capital flight, the worldwide credit crunch, lower oil prices and the heavy losses on Russia's stock markets "are slowing domestic demand - hitherto the engine of Russia's growth," the bank said.

Between May and November, the stock market lost one trillion dollars (790 billion euros) in value - equivalent to 84 per cent of gross domestic product - with Russia's super-rich alone losing 300 billion dollars, it said.

The events have been a stark wake-up call for an economy that grew 8.1 per cent in 2007 and 7.4 per cent in 2006, driven largely by soaring commodity prices, especially for oil.

The report warned the financial crisis would have a significant human dimension in Russia.

"The implications of the financial crisis on Russia's poor are troubling ... The higher poverty headcounts imply that 1.3 million fewer people will move out of poverty between 2007 and 2009," the bank said.

But the bank also said that Russia's improved fiscal management had protected the country from the worst excesses of the shock and praised the government for a "swift, coordinated and comprehensive" response.

"Russia is better prepared today to deal with these challenges than at any time since the beginning of transition (from Communist rule in 1989)," it said.