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The World Bank outlook on Russia

The World Bank’s Russian Economic Report #3 published in April 2015 initially projected a negative growth outlook for Russia in 2015-16. The World bank this week has revised its view of the Russian economy due to slowing inflation and a stronger rouble. They predict that the economic contraction will not be as severe as previously indicated. It now sees the GDP fall of 2.7% through 2015, an improvement from a 3.8% decline.

The Russian economy has been adversely affected by the falling oil prices and the US sanctions placed against them so the recent uptake in oil prices has been uplifting. Senior Russian federation Economist Birgit Hansl says “"The revised forecast is largely driven by the adjustment in oil prices over the previous two months that is supporting the ruble exchange rate and a slightly faster retreat of inflation. That would allow the Central Bank of Russia to pursue monetary easing at a more rapid pace for the rest of 2015, as a result bringing down borrowing costs and increasing lending to firms and households. Both investment and consumption growth would contract slightly less than previously expected."

The economy ministry said last month it expects Russian GDP to shrink by 2.8% this year and then start growing by at least 2.3% a year from 2016-18.

However, close on the heels of this improved economic outlook, Russia once again did not gain favour with the European Council as it announced a “Stop List” of 89 European politicians from the UK, France and Germany, who are now banned from entering the country. This will lead more likely than not to the Council extending further sanctions on Russia in the coming year.

References:

http://www.nasdaq.com/article/russias-economy-contracts-42-but-outlook-improves-update-20150601-00771
http://www.thestreet.com/story/13170287/1/russias-economic-outlook-looks-a-bit-less-bad-says-world-bank.html
http://www.worldbank.org/en/news/press-release/2015/04/01/russia-economic-report-33

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