Heat wave could cost Russia almost 1 percent of GDP | Europe| News and current affairs from around the continent | DW | 11.08.2010
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Heat wave could cost Russia almost 1 percent of GDP

Fire, drought and smog in the heat wave are likely to cost Russia's economy 5-12 billion euros. An estimated 10 million hectares of agricultural land has been destroyed.

Soldiers spray water from hoses in a forest

Thousands of firefighters have been deployed to fight the blaze

Economists are suggesting the current heat wave in Russia could cost the economy between 5 and 12 billion euros ($7-15 billion) and undermine the current modest economic revival in the country.

The figure accounts for immediate losses in the agricultural, industrial and services sector, but does not factor in losses that stem from a spike in deaths and illnesses.

The heat wave has been accompanied by a persistent drought, and forest fires which have caused a thick smog to descend over the capital Moscow.

Several leading Russian industrial firms have shut down production during the heat wave to spare workers the consequences of the high temperatures. Toxic smog from the forest and peat fires is keeping shoppers away from Moscow's shopping malls, which form the bulk of Russia's retail business.

American tourists in Moscow wearing face masks in the smog

A dense smog over Moscow is hitting retail and service industries

Before the temperatures hit record highs, the economy had been expected to grow about 4 percent in 2010.

Land destroyed, prices rocket

An estimated 10 million hectares (25 million acres) of agricultural land has been destroyed due to fire and drought.

Alexander Morozov, chief economist for Russia and the CIS at HSBC, expects the heat wave 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.

World wheat prices have rocketed at the fastest rate in over 30 years, and there is speculation of a food crisis. Prime Minister Vladimir Putin has banned grain exports in an attempt to keep domestic food costs down.

More expensive grain could also push up animal feed costs and force farmers to slaughter livestock.

A tree trunk burning amid smoldering remnants of a forest

Large swathes of land have been reduced to wasteland

Battling the fires

Russian firefighters are continuing to try and control wildfire blazes that have sprung up due to the heat and the drought.

An area 10 times that of New York City, more than 7,600 square kilometers (2,934.4 square miles), has been scorched by the fires, and so far at least 54 people have been killed.

The fires are still threatening key nuclear sites, such as Russia's main nuclear research center in Sarov and the nuclear waste processing plant at Mayak.

Author: Catherine Bolsover (AFP/Reuters/dpa)
Editor: Nancy Isenson

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