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Analysts: Impact Of Drought, Fires In Russia Offset By Other Economic Factors

The fires have destroyed hundreds of thousands of hectares of land in Russia.
The fires have destroyed hundreds of thousands of hectares of land in Russia.
MOSCOW -- Russia-based analysts say the economic impact of this summer's destructive fires and drought will be offset by government spending and higher oil prices, RFE/RL's Russian Service reports.

Mark Rubenshtein, a Moscow-based financial analyst with the investment firm Metropol, told RFE/RL he predicts there will only be a minor slowing of overall economic growth in 2010 as a result of the disasters.

"The cost of damages caused by the extreme temperatures may be high [for certain] sectors," Rubenshtein said. But he added that "on the other hand, dealing with the aftermath of the fires is tied to government spending. The growth [in government spending] will to a large extent even out the economic damage caused by the exceptional heat."

Rubenshtein said funds to pay for the damage caused are available in Russia's 2010 budget reserve, meaning a revision of the budget will not be necessary.

"At the same time, budget revenues are growing thanks to the growth in the price of oil," he said. Rubenshtein predicted that the average price per barrel for Urals crude in 2010 will reach $76 to $78.

The Russian government's previous official forecast was predicated on an annual average of $58 per barrel.

Yelena Penukhina, an analyst with the Center of Macroeconomic Analysis and Short-Term Prognosis, also predicted that the budget deficit in 2010 will not be higher than 4.8 percent of GDP thanks to higher oil prices. She said the government's management of the budget has improved noticeably.

"Judging by the results of the first half of the year, we can now say with certainty that there will not be an inflationary surge in [budget] spending in the last two months of the year," Penukhina said.

"This year in Russia the administration of the budget really has improved," she said. "In the first half of the year the government managed to allocate around 42 percent of all spending planned for the year. This is a record-high figure -- it's usually much lower -- and indicates that so far this year budget funds have been allocated on an almost balanced timescale."

Wildfires in central and western Russia have been burning for weeks. They have thus far killed at least 50 people and devastated hundreds of thousands of hectares of land. Some 500 fires are still burning and extensive drought along with the fires has severely affected the country's agricultural sector.