Fires and heatwave could dent economy

The worst heatwave on record in Russia could knock a full percentage point off its gross domestic product, according to economists, as emergency responders continued to fight more than 500 wildfires across the country.

By William EDWARDS (video)
News Wires (text)

REUTERS - Russia’s deadly summer heatwave could wipe up to $14 billion off economic growth, economists said on Tuesday, as wildfires raged on in several provinces and forecasters said sweltering weather would not abate this week.

Prime Minister Vladimir Putin, who has sought to burnish his action-man image and minimise political fallout from wildfires and drought, flew in a fire-fighting plane that dropped water on a blaze southeast of Moscow, state media reported.

State-run television showed Putin wearing headphones in a cockpit, pressing buttons on a handheld control panel.

Weather forecasters said by Monday the unprecedented heatwave had lasted for an uninterrupted 50-day streak in Moscow and central Russia, with day temperatures hovering at 32 degrees Celsius (90 Fahrenheit) or above.

An Interior Ministry officer and a prisons service guard died fighting fires near the Sarov nuclear research centre and in the nearby Mordovia region, bringing the official death toll from the fires to 54.

But doctors say hundreds more people are believed to have died from the effects of the heatwave and smoke choking Moscow.

The U.S. State Department is allowing nonessential staff and dependents of the embassy in Moscow to leave if they want.

The worst heatwave on record could knock 1 percentage point off gross domestic product, according to estimates, weakening a recovery from a 2009 slump due to the global financial crisis.

Before blistering temperatures parched crops and stoked wildfires, the economy had been expected to grow about 4 percent in 2010 after dropping by 7.9 percent last year—the first contraction in a decade.

The drought also threw up another barrier to the Kremlin’s dream of cutting dependence on oil and commodities by developing and modernising other sectors such as agriculture.

With elections in the next two years, Putin and President Dmitry Medvedev are eager to avert a repeat of the fires that have provided fuel for critics who accuse them of mismanagement.

The government backed a proposal by Emergencies Minister Sergei Shoigu late on Monday to pump 54 billion roubles ($1.81 billion) over the next three years into the firefighting force, whose weaknesses have been exposed by the wildfires.

Critics called the investment too little, too late, warning it would not fix a fire-protection system they say has been gutted by short-sighted legislation and sorely lacks equipment.

Stanislav Belkovsky, a political analyst and Kremlin critic, said the spending “will not solve the problem at all”.

Russia needs tens of thousands of fire trucks and dozens of planes that are no longer made domestically, he said.

Drought aggravated

The Emergencies Ministry said the area covered by wildfires was unchanged on Tuesday, with firefighters battling 557 fires covering 1,740 square km. A spokeswoman said 42 aircraft and nearly 166,000 people were fighting the blazes.

Moscow mayor Yuri Luzhkov, whose absence on vacation last week drew opposition demands for his resignation, said nobody was to blame but the forces of nature.

“This is a new challenge from the heavens,” Luzhkov told Russian daily Izvestiya in an interview published on Tuesday.

However, the Kremlin said he should have returned earlier.

Agriculture Minister Yelena Skrynnik fired the head of forest management for Moscow and the surrounding province.

The death rate in that province was up by one-quarter over the lpst three weeks, Interfax quoted the provincial health minister as saying.

The heatwave—probably the worst in Russian history, according to the state weather forecaster—has aggravated a drought that has driven world wheat prices up at the fastest rate in over 30 years and raised the spectre of a food crisis.

Alexander Morozov, chief economist for Russia and CIS at HSBC, expects the heatwave and its aftermath to shave 1 percentage point off GDP growth.

“The losses in agriculture now look more serious, and I expect that will contribute 0.5 percentage points. The remaining half a percent will come from other sectors—lower industrial output, lower demand and lower productivity,” he said.

The toxic smog over Moscow has cast a pall over Russia’s commercial centre and is expected to eat into profits for restaurants and shops. Some economists, however, believe the total loss in GDP will be closer to 0.5 percent.

Average highs of at least 35C are expected to persist throughout the week in central Russian regions and the south, the deputy head of Russia’s state-run forecasting service, Dmitry Kiktyov, told Reuters.