Thu, Dec 25, 2008 - Page 1 News List

Russia, China warn of dire economic straits next year

MOSCOW , AFP

Russia and China issued stark warnings yesterday about the impact of the crisis on their recently booming economies next year, with Moscow saying the downturn could spark unrest in the streets.

A top Kremlin economic aide said there would be a budget deficit next year for the first time for a decade as Russia — the world’s second-biggest producer of crude oil after Saudi Arabia — reels from the global crisis.

“The deficit is caused by the fall in oil prices, above all,” Arkady Dvorkovich was quoted as saying in reference to the plunge in prices from record highs of above US$147 per barrel in July to under US$40 now.

With oil prices heading towards the year end at their lowest level for four years, the price of Brent North Sea crude for February sank to US$38.63 per barrel on London’s InterContinental Exchange amid weakening demand.

Russian Deputy Interior Minister Mikhail Sukhodolsky, warned that unpaid wages, the threat of layoffs and unpopular government anti-crisis measures “may aggravate the protest mood.”

China’s top economic planner also warned of “great challenges” ahead.

National Development and Reform Commission Chairman Zhang Ping (張平) said “grave risks” lay ahead for goals of fast growth and high employment if the government did not manage to stimulate demand and maintain export growth.

Economists have warned that the global downturn could mean that China will end this year with its weakest economic growth for nearly two decades.

Meanwhile, Germany prepared to pump billions of euros into the economy in a new rescue plan.

Newspaper reports said the government was planning a second stimulus program for next year that could see the government pump 40 billion euros (US$56 billion) into the economy.

In a sign of the times, poodles, terriers and sheepdogs lined up in east Berlin for rations in the country’s first soup kitchen for pets, housed in a disused school.

The soup kitchen was opened in October and offers free food for pets belonging to pensioners and the unemployed.

Julia Raasch, who heads the soup kitchen, said: “We’ve already signed up nearly 400 people. And our stocks are dwindling fast.”

Also See: Japan passes record-high budget bill

Also See: China’s top economist warns of growth threat

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