Ignoring Global Credit Crisis, Economy Grows 7.6% in Q3

The economy expanded an annual 7.6 percent in the third quarter, better than expected, suggesting that problems on global credit markets have not had a major impact on the country.

Gross domestic product growth followed expansion of 7.8 percent in the second quarter and 6.8 percent in the third quarter last year, the Federal Statistics Service said on its web site Friday.

The data are not seasonally adjusted.

"The effect of the global credit crunch was less significant than some feared," said Yaroslav Lissovolik, chief economist at Deutsche Bank in Moscow. Capital investment and consumption were "strong and remained the main drivers of growth."

The country is enjoying its ninth consecutive year of economic expansion, boosted by rising incomes and spending. Wages expanded at an annual rate of more than 10 percent every month since February 2006, reaching a monthly average of 13,540 rubles ($553) in October.

Fourth-quarter data are also likely to be "robust," showing the resilience of the economy amid fears of a global economic slowdown, Lissovolik said.

The fallout from the U.S. subprime mortgage market collapse has rippled through the world financial system, raising borrowing costs and fueling concerns of a slowdown in Russia. Net capital inflow declined to $56.8 billion in the third quarter from a record $66.2 billion at the end of June, according to the Central Bank.

Mortgage securities and leveraged loans have already caused $66 billion of losses at the world's banks. Goldman Sachs estimated last month that losses in credit markets worldwide might reach $726 billion.

The economy will expand at least 7.3 percent this year, up from 6.7 percent in 2006, according to Economic Development and Trade Ministry forecasts.

Economic growth may reach 7.6 percent, more than the 7.4 percent rate previously forecast by Alfa Bank, said Natalya Orlova, the bank's chief economist. Deutsche's Lissovolik also forecasts growth at 7.6 percent.

The economy will probably continue to expand at the rate of more than 7 percent next year and in 2009, Lissovolik said.