Toronto Star

Ruble falls as Russian economy reverses

Energy giant faces recession after currency dropped 41 per cent against U.S. dollar


MOSCOW— Russia’s economy had its first decline since October 2009 last month as manufactur­ing and investment shrank when a currency rout pushed the ruble to a record low.

Gross domestic product shrank 0.5 per cent in November from a year earlier after a 0.5-per-cent increase in October, the Economy Ministry said in a report on its website Monday. GDP fell 0.2 per cent from the previous month on a seasonally adjusted basis after a 0.1-per-cent advance in October.

The world’s biggest energy exporter is facing its first recession since 2009. With oil prices around $60 (U.S.) a barrel, the economy may contract about 4 per cent next year, according to Finance Minister Anton Siluanov. “GDP dynamics will probably worsen later on, feeding the already pessimisti­c expectatio­ns over the prospects of the Russian currency,” said Dmitry Polevoy, a chief economist at ING Groep in Moscow. “A positive contributi­on of net exports can’t make up for a contractio­n of domestic demand and a deeper fall in investment.”

The ruble, the second-worst performer this year among more than 170 currencies tracked by Bloomberg after Ukraine’s hryvnia, has lost 41 per cent against the U.S. dollar.

“A sharp slowdown in manufactur­ing had the main negative effect on GDP dynamics in November,” the ministry said in the statement. Constructi­on, wholesale trade and agricultur­e also remained negatively affected, it said.

The central bank has raised borrowing costs six times since March to curb inflation ignited by the ruble’s collapse.

“The consumer-goods producers stopped benefiting from the retailsale­s growth,” Alexander Morozov, a chief economist for HSBC, said in a report.

“This suggests that the import substituti­on in this sector further to the ruble depreciati­on may be problemati­c and will take time, at best.”

Newspapers in English

Newspapers from Canada