Rus­sian econ­omy shrinks most since 2009

The Pak Banker - - BUSINESS -

MOSCOW: Rus­sia's econ­omy con­tracted the most since 2009 last year as the price of oil, a key ex­port, sank and sanc­tions over the con­flict in Ukraine curbed ac­cess to in­ter­na­tional fi­nanc­ing. Gross do­mes­tic prod­uct fell 3.7 per­cent af­ter growth of 0.6 per­cent in 2014, the Fed­eral Sta­tis­tics Ser­vice said Mon­day on its web­site, cit­ing pre­lim­i­nary es­ti­mates.

"The econ­omy's go­ing through big ad­just­ments -- it's still ad­dicted to oil," Vladimir Mik­la­shevsky, a strate­gist at Danske Bank A/S in Helsinki, said by e-mail. "The weak ru­ble and im­port sub­sti­tu­tion will con­tinue to sup­port lo­cal pro­duc­tion, al­though on a mod­er­ate path. It's a long and painful jour­ney to re­cov­ery." The econ­omy of the world's largest en­ergy ex­porter is fac­ing a se­cond year of con­trac­tion af­ter a re­newed slump in crude prices at the start of 2016 sent the ru­ble tum­bling to a record. Mon­e­tary-pol­icy mak­ers, meet­ing Fri­day to dis­cuss in­ter­est rates, have lim­ited room to trim bor­row­ing costs with in­fla­tion at more than three times their medium-term tar­get. The cen­tral bank has held its bench­mark rate at 11 per­cent for the past three meet­ings. The ru­ble has lost more than 20 per­cent against the dol­lar in the past three months, the se­cond-worst per­former among 24 emerg­ing-mar­ket cur­ren­cies tracked by Bloomberg, be­hind Ar­gentina's peso. While slow­ing in De­cem­ber, in­fla­tion was still 12.9 per­cent, fur­ther chok­ing con­sumers' spend­ing power.

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