The Russian economy will shrink by 7.9 percent in 2009, the World Bank said on Wednesday, a much sharper contraction than the 4.5 percent it forecast earlier.

The Russian economy contracted by 10.2 percent in January-May 2009, according to Economy Ministry estimates, and First Deputy Prime Minister Igor Shuvalov told Reuters on Tuesday the annual contraction may reach 9 percent.

“Given a much larger gross domestic product contraction in the first quarter of 2009 than anticipated, Russia’s economy is likely to contract by 7.9 percent in 2009, despite higher oil prices assumed in the current forecast,” the World Bank said in its quarterly country report.

Russia, the world’s largest energy producer, has been hit hard by the plunge in global demand for commodities, while its banks and many businesses that had borrowed heavily abroad have been squeezed by the global credit crunch.

The World Bank forecast Russia’s jobless rate to rise to 13 percent by the end of this year, from its 9.9 percent May level, and projected Russia would return to “moderate growth” of 2.5 percent in 2010 and 3.5 percent in both 2011 and 2012. It said the economic recovery will be “gradual and prolonged”.  Read the rest of this entry »