Russia’s economy will contract by -4.5% in gross domestic product (GDP) terms in 2009 amid a further massive retreat of capital, according to the World Bank.

The new GDP figure represents a major revision of the bank’s earlier forecast of +3% growth and is double the latest estimates for a contraction of -2.2% issued by the Russian government.

The bank’s chief economist for Russia, Zeljko Bogetic, said in the report: ‘The scale of this revision reflects the dislocation of the global economy in the intervening months.’

The country’s economy also faces further downside risks due to the uncertainty surrounding the price of oil ( Russias chief export) and the timing of a possible global recovery, according to Bogetic.

However, the World Bank’s estimates are based on the $135bn debt obligations that the banking and corporate sectors face this year as well as a significant slowdown of foreign direct investment and further outflow of capital from the country, believes Bogetic.

The bank also said Russia’s unemployment rate may exceed 12% and that the Government needs to boost its social spending to aid the unemployed and the poor to prevent any social unrest.