In the first three quarters of 2010 GDP expanded by a robust 6.5% year on year. The increase contrasts with the 3.8% full-year contraction in 2009 as economic activity was negatively affected by the global economic recession, reinforced by the effect on economic activity of the war with Russia in 2008. In the first three quarters of 2010 all the main sectors expanded year on year, except agriculture, which contracted by 0.7%. We have revised our 2010 real GDP estimate to 6.1% from 5.3%, to take account of the robust performance in the third quarter. Nonetheless, we expect that real GDP growth will slow in the final quarter as the impact of base-period effects is reduced.

Real GDP growth will slow modestly in 2011, to 4.3%, as external demand dips. An improvement in external conditions in 2012 will result in an expansion in real GDP of 5.2% in that year. The rate of expansion in the forecast period will be slower than the average of 9.3% in 2004-07. Higher prices for base metals in 2011-12 than in 2009 will support export volumes and revenue. Annual average expansion of 4.4% of Russian real GDP in 2011-12, following a severe recession in 2009, will continue to have a positive impact on inflows of workers' remittances, supporting domestic demand. Private investment will increase more robustly in 2012 than in 2010-11, owing to the loosening of liquidity constraints, although private investment is not likely to return to the levels seen before 2008.