Russian economic slump to persist as oil price languishes

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Russian economic slump to persist as oil price languishes

Reuters
October 30, 2015, 12:01 am

By Jason Bush and Kira Zavyalova

MOSCOW (Reuters) - Russia's economy will slump by almost 4 percent this year and barely grow in 2016, a Reuters poll predicted on Thursday, with forecasters expecting the country's recession to persist as oil prices remain depressed.

The poll predicted that gross domestic product would end up shrinking 3.9 percent this and grow by 0.3 percent next year, only slightly better than a previous Reuters poll in September that predicted a 4 percent decline in 2015 and a 0.2 percent rise in 2016.

Russia's economy has been hit by falling global commodity prices and is coming under stress from sanctions imposed on it by mainly Western nations angry over what they see as Russia's aggressive policy towards Ukraine.

Recovery prospects have been dimmed by signs that a global glut of oil will continue for the foreseeable future, keeping the price of Russia's main export depressed at around $50 per barrel.

"This (recession) is probably going to last for a couple of quarters more than the government is saying officially," said Christopher Shiells, senior emerging markets analyst at Informa Global Markets. "And that is purely because the outlook for oil is remaining very soft for at least the next couple of years. I'm of the view that oil will remain roughly where it is now."

The poll predicted that quarterly GDP would turn positive in year-on-year terms only in the third quarter of next year, when 0.3 percent growth is expected compared with a 4 percent decline in the fourth quarter of 2015.

The outlook for inflation was more pessimistic than last month's poll. Forecasters now expect it to end 2015 at 13 percent, compared with 12.8 percent predicted in September, falling to 8 percent by the end of 2016.

The poll predicted that the central bank would leave its main lending rate on hold at 11 percent at a meeting on Friday, in line with a Reuters poll on Monday that also predicted no change this month.

A majority of analysts expected the central bank would cut the rate by the end of 2015, with the median forecast predicting a 0.75 percentage point cut. The rate is seen falling further to 8 percent by the end of 2016, bringing it into line with inflation.

Forecasts for the rouble have also become more bearish. Economists now see it at 65.75 in twelve months' time, compared with last month's 12-month forecast of 65.00 and today's value of around 64.4.

(Reporting By Jason Bush and Kira Zavyalova Editing by Jeremy Gaunt)






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