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UPDATE 1-Russia GDP halves in Q3, still above fcast

MOSCOW, Nov 12 (Reuters) - Russia's gross domestic product (GDP) rose for the third quarter in a row in annual terms, however the growth nearly halved in July-September, hit by a fall in output due to severe summer drought. GDP grew by 2.7 percent in the third quarter, significantly below the 5.2 percent year-on-year growth seen in the second quarter, but still above the most recent official forecast of 2.2 percent, preliminary data from the Federal Statistics Service showed on Friday. An economic slowdown had been expected in the third quarter chiefly because of the worst heatwave in decades that destroyed one-third of Russia's crops during the summer. "The summer was not a good one for Russia," Roland Nash, chief strategist at Renaissance Capital in Moscow, wrote in a recent note on Russia's GDP growth potential. "First, it was hit by the mini-crisis out of Europe. The cost of capital rose sharply and investment programmes were likely put on hold. Then, a drought and one of the hottest summers on record crushed agriculture, and forest fires across European Russia reduced output in August." The Statistics Service, or Rosstat, did not provide cumulative GDP growth for the first three quarters of the year, but the official forecast calls for around 4 percent GDP expansion for the whole year. This would be a reversal of fortunes for Russia, which saw its economy shrink 7.9 percent last year -- the country's worst performance in more than a decade. Analysts at Renaissance Capital see the Russian economy expanding 3.6 percent in annual terms in the last three months of the year and growing a further 5.3 percent in the first quarter of next year. "Barring another external shock, we think increasing consumption, loan growth and loose fiscal policy will likely drive faster growth than the market currently expects in 2011," Nash said. An economic recovery slowdown in Russia is being accompanied by a persistent budget deficit that came to 2.1 percent of GDP in the first 10 months of 2010, the Finance Ministry said on Friday. However, Russia's fundamentals remain fairly sound thanks to strong oil prices, with the trade balance posting a surplus of $10.41 billion in September, up from $7.96 billion in August. (Writing by Lidia Kelly; Editing by Giles Elgood) Keywords: RUSSIA GDP/ (lidia.kelly@thomsonreuters.com; +7 495 775 1242) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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