OREANDA-NEWS. June 18, 2010. The World Bank has lowered its forecast on Russia’s 2010 GDP from 5-5.5% to 4.5%, citing a weak 1Q10. However, the bank upgraded its 2011 GDP growth forecast from 3.5% to 4.8%, reported the press-centre of OTKRITIE Financial Corporation.

View: Russia’s GDP grew just 2.9% YoY in 1Q10, from a weak base line-- a 9.4% YoY contraction in 1Q09.  This was indeed much weaker than markets had expected.  March-April saw a 29% YoY rise in imports, whichreinforces our concern that the modest recovery in consumption is being offset by accelerated imports growth.

While investments have just begun to demonstrate positive growth, this is rather a reflection of the low base line, and as such will not be the driver of growth in 2010. Moreover,  the prospects for a global economic recovery have dampened somewhat due to the European debt crisis, which means that external demand will be less supportive of domestic growth. We remain comfortable with our forecast of 3.1% GDP growth for 2010, and 3.9% growth in 2011. Given the country’s sharp drop in GDP in 2009 (-7.9%), this translates into a very sluggish recovery for Russia.