Russian economy to contract at the start of 2015, says central bank
City Index December 15, 2014 10:26 PM
<p>The economy is likely to contract in the first quarter of 2015 amid a fall in oil prices.</p>
Russia's central bank said today (December 15th) it was likely the economy would contract in the first quarter of next year. It revealed it could shrink by around 4.5 per cent in 2015 as a whole if oil prices average $60 (£38) a barrel, Reuters reports.
The country relies heavily on the export of oil produced domestically and has been affected by sliding oil prices, which have been on the decline since the start of the year.
However, it recently voiced its opposition to a debate on whether members of the Organization of Petroleum Exporting Countries (Opec) should reduce output.
The central bank also said today that inflation could reach 11.5 per cent early next year and that it would have to keep monetary policy tight next year if it is to meet its mid-term inflation target of four per cent by the end of 2017. Capital outflows of around $120 billion are predicted for next year, $75 billion in 2016 and $55 billion in 2017.
The bank announced that rates would be raised one percentage point to 10.5 per cent, six weeks after it was changed from eight per cent to 9.5 per cent.
Officials stated there are concerns over "further aggravation of inflation risks" and that the central bank would continue to raise the rate to help combat this measure.
Meanwhile, the World Bank said it expected the Russian economy to contract by 0.7 per cent in 2015 before growing by 0.3 per cent in 2016. It assumed in its calculation an average oil price of $78 per barrel for 2015 and of $80 per barrel for 2016.
"Investment is projected to contract for a third year in a row in 2015, because of continued uncertainty, restricted access to international financial markets by Russian companies and banks, and lower consumer demand," Birgit Hansl, World Bank lead economist for Russia, said in a statement.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.