Russia Issues Recession Warning if Sanctions Continue

The Russian government has warned the economy will fall into recession next year as Western sanctions, in response to its role in eastern Ukraine, and falling oil prices begin to bite.

Russia’s economic development ministry estimates the economy will contract by 0.8% next year.

It had previously estimated the the economy would grow by 1.2% in 2015.

Russia’s reliance on tax revenues from the oil industry makes it particularly sensitive to price movements.

Household disposable incomes are also forecast to decline by as much as 2.8%, compared with a previous estimate that they would grow by 0.4%.

The sharp revision in Russia’s economic forecast is the first admission from the government that the economy will contract.

“The current prognosis is based on a drop in GDP by 0.8% in 2015, against the previous prognosis of growth by 1.2%,” deputy prime minister Alexi Vedev said.

On Monday, the rouble suffered its biggest one-day fall since 1998.

The currency slid almost 9% against the dollar before rallying after suspected central bank intervention. The currency has already lost 40% in value this year.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza