August 19th, 2010

Weather compounds fiscal worries

Record high temperatures and wildfires across the country have compounded Russia’s financial woes as analysts predict this year’s wheat harvest to be almost 20% lower than last year’s. Although agriculture consists of less than 5% of Russia’s GDP, grain became Russia’s top agricultural export in 2008 and remains an important component of the economy. Domestic grain have kept food prices in Russia low, even as its food imports exceed exports 3 to 1.

In Reuters’ most recent analysis of Russia geopolitical risk, there is little change from the last report as  “corruption and arbitrary rule of law” remain the biggest risks and its main impediment to growth. Higher oil prices would help with Russia budget deficit and lessen the need for tax hikes or reducing benefits.

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