RUSSIA’S ECONOMIC STAGNATION CONTINUES.

Official data for the first seven months of 1997 indicate that the Russian economy continues to stagnate. (Russian agencies, August 18) GDP for the January-July period was down 0.2 percent compared to the same period in 1996, despite slight growth in industrial production (1.2 percent) and retail sales (0.5 percent).

Although the absence of an economic recovery comes as a surprise to most foreign observers, some hopeful signs are apparent. Production in 25 of Russia’s 89 Federation subjects is expected to rise this year, and growth in Murmansk, Perm, Ryazan, Tatarstan, Ulyanovsk, and Udmurtia is forecast at 3-5 percent. The unemployment rate (calculated according to International Labor Organization methodology) at the end of July had fallen to 9.3 percent, from close to 10 percent this spring. Both consumer- and producer-price inflation had down below 15 percent on an annualized basis at the end of July, and producer prices actually declined by 0.1 percent last month. Real household incomes during the first seven months rose by some 5 percent, thanks in part to progress in paying off budget-sector wage arrears. The service sector accounted for an estimated 50.3 percent of Russian GDP, while small firms and firms with private capital were chiefly responsible for the growth in industrial production.

In effect, Russia seems to have experienced three different macroeconomic phases this year. The slight growth in Russia’s GDP recorded during January-February was more than negated by the larger decline in output registered during the March-May period. The June-July phase was essentially one of no growth, thereby prolonging the slight recession recorded during the first five months. Russia’s 1997 economic performance may well be determined by developments in the second half of the year.

Progress in Anti-Ballistic Missile Treaty Talks.