Rus­sian re­ces­sion finds no bot­tom as eco­nomic skid wors­ens

The Pak Banker - - BUSINESS -

Rus­sia, which Moody's An­a­lyt­ics es­ti­mates en­tered a re­ces­sion in the first quar­ter, may be in for a rough ride. Gross do­mes­tic prod­uct shrank 4.6 per­cent from a year ear­lier in the sec­ond quar­ter, the most since 2009, af­ter a 2.2 per­cent slump in the pre­vi­ous three months, the Fed­eral Sta­tis­tics Ser­vice said, cit­ing pre­lim­i­nary data. Cap­i­tal Eco­nom­ics Ltd. sees a down­turn that will trough with a 6.3 per­cent plunge in the third quar­ter, while HSBC Hold­ings Plc pre­dicts this year's worst per­form- ance from Oc­to­ber to De­cem­ber.

A steeper drop would run counter to as­ser­tions by gov­ern­ment of­fi­cials that last quar­ter marked "the low­est point" for Rus­sia, with growth set to re­sume late this year or at the start of 2016. What's set­ting the econ­omy back is a re­newed slide in com­mod­ity prices that saw crude drop to a six-month low last week, ham­mer­ing the ru­ble and shak­ing a coun­try that re­lies on oil and gas for about half of its bud­get rev­enue.

"I don't see any­thing turn­ing up for Rus­sia right now," said Charles Movit, an economist at IHS Global In­sight in Washington who pre­dicts the coun­try won't have its first full year of pos­i­tive growth un­til 2017. The lower oil price "puts more pres­sure on the ru­ble and as the ru­ble de­pre­ci­ates, it pushes in­fla­tion. So that's more of a squeeze on con­sumers." Urals, Rus­sia's ex­port blend of crude, av­er­aged $57 in the first half, down al­most 47 per­cent from the same pe­riod a year ear­lier, ac­cord­ing to the Econ­omy Min­istry. The ru­ble has de­pre­ci­ated about 44 per­cent in the past 12 months, the worst per­for­mance glob­ally, ac­cord­ing to data com­piled by Bloomberg.

"If cur­rent oil prices re­main, any im­prove­ment may be de­layed," Dmitry Polevoy, chief Rus­sia economist at ING Bank Eura­sia JSC in Moscow, said by email. "More­over, the risks of re­ces­sion con­tin­u­ing in 2016 will grow."

The GDP de­cline in the first three months was worse than all but five pre­dic­tions in a Bloomberg sur­vey of 18 an­a­lysts. Econ­omy Min­is­ter Alexei Ulyukayev said on Tues­day that his min­istry may re­vise its forecast for this year af­ter last quar­ter's per­for­mance came in worse than its es­ti­mate for a 4.4 per­cent slump.

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