ENVIRONMENT - If you didn't think climate change and global warming can hurt the economy think again. Trading on Moscow's stock exchange has dropped 25% in the past five days as bankers, bond traders, investors and Muscovites flee the record heat wave, drought, wildfires and acrid smog which has crippled the city.
The smog in Moscow is so thick you can't see more than 30 meters in front of you.The heat wave in Russia has reached a record high temperature of 44 degrees C, hundreds of forest fires rage across the region, and there’s no end in sight for what is being called the worst heat wave to hit Russia since record-keeping began during the rule of Alexander II in 1880.
Corporate bonds have dropped to its lowest point since 2007, down 26% compared to 2009.
Bond trading for Moscow's big banks have dropped 58.2% compared to the same period last year. Bond trading was 1.12 trillion rubles during August 2009, but so far has only traded 156 billion rubles ($5.2 billion USD) worth. Bond trading in July was also down approx. 30% when the heat wave first began.
Micex and RTS exchanges are down 60% below normal levels.
Moscow's death rate has doubled, mostly due to heat stroke and smog inhalation, to 700+ people per day.
Sugar crops have dropped 13%, wheat prices have soared and Russia has declared a state of emergency in 28 crop producing regions which are being hit by droughts and wildfires. Food prices are up dramatically and the Russian government has now banned grain exports.
JPMorgan Chase & Co. and various banks are sending all non-essential staff home due to the extreme heat and breathing difficulties.
Thick clouds of toxic smog have choked downtown shopping centres, forcing shoppers to stay away and malls to close.
Even Russia's currency is falling in value due to the current environmental conditions in Moscow, dropping 0.5% despite recent upward trends.
Many Muscovites have fled the city by plane. On Aug. 7th 95,000 left the city by plane followed by another 104,400 people who fled on Aug. 8th
“I judge the smoke on how well I can read the small print,” jokes one investment banker.
Prior to the current heat wave/smog crisis Russia's economy was in recovery mode, bouncing back from the worst recession in 15 years. Economists were hoping Russia's economy would rebound 4% in 2010 but now they're expecting only 3% growth since the heat wave and drought have hurt the Russian economy. Conservative estimates are the Russian economy has been damaged to the tune of $14 billion USD so far.
The biggest damage is to Russia's government coffers which has seen a drop in taxes coming in, but also is planning 35 billion rubles in subsidies / loans pledged to the agriculture sector, plus another 6.5 billion rubles to rebuild damaged homes and untold billions more to help families of the dead.“What’s happening with the planet’s climate right now needs to be a wake-up call to all of us to take a more energetic approach to countering the global changes to the climate,” says Russian President Dmitry Medvedev.Meanwhile Pakistan and parts of China are dealing with the worst flooding in 80 years. Argentina, Peru, Brazil and Chile are experiencing record cold and snowfall.
And in other news 2010 is on track to surpass 1998 as the world’s hottest year on record.
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