Page last updated at 15:32 GMT, Tuesday, 11 August 2009 16:32 UK

Russian economy shows mixed signs

A gas pipeline from Russia
Oil is sharply lower than it was a year ago

Russia's economy shrank at an annualised pace of 10.9% in the three months to 30 June, Federal State Statistics figures have shown.

The fall was greater than forecast and more than the 9.8% contraction seen in the first quarter.

But compared with that first quarter, the Russian economy expanded 7.5% between April and June.

Russia has been hit by the sharp fall in energy prices compared with a year ago, when oil peaked at $147 a barrel.

'Bad debts'

"It's much worse than the market expected," said Chris Weafer at Uralsib investment bank in Moscow.

He explained that the economy's continuing contraction was not simply a result of lower oil prices.

"The underlying problem is the fact that there is very little bank lending taking place beyond the biggest companies accessing loans from big state banks.

"This is due to uncertainty about non-performing loans and bad debts," he said.

Russia, which is heavily reliant on oil exports, now expects its economy to shrink as much as 8.5% in 2009.

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