Russian economy to enter period of lengthy decline in 2015 – Economic Ministry

Diverse Paper Currency, Coins, Line Graph

(Interfax – MOSCOW, Feb. 17, 2015)

The Russian economy will enter a period of lengthy decline in 2015, the Economic Development Ministry said in its updated forecast.

“If major geopolitical risks and hypotheses that oil will average at $50 a barrel persist, then GDP could fall 3%. According to forecasts, the economy will enter a period of lengthy decline in 2015,” the ministry said.

The ministry did not say what it meant by “lengthy decline”.

The ministry will not adjust its 2016 forecast until April. It has said the economic decline might bottom out in the middle of this year and grow in 2016.

The ministry says in the updated forecast that the package of measures that the government has approved to achieve sustainable economic growth and social stability will prevent substantial decline for several key macroeconomic indicators in 2015.

The ministry said higher allocations of budgeted loans to the budgets at various levels of government and support for industries will boost capital investment by all sources approximately 2 percentage points compared with the scenario that does not take the anti-crisis measures into consideration.

Measures to support vulnerable sections of the population, even with a slight increase in related inflation, should ensure additional growth of 1.1 pp in real incomes. That increase will be reflected in a reduction in the extent of retail turnover decline by 1.2 pp and retail in services by 0.8 pp.

“As a result, the overall reduction in the rate of GDP growth is expected to be less than in the scenario that does not include the anti-crisis measures by approximately 0.9 pp,” the ministry said.