Russian economy shrank by 1.2 percent in first quarter

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May 16, 2016 11:31 PM

Russia's economy contracted by 1.2 percent in the first quarter of this year compared with the same quarter last year, in a tentative sign of stabilisation, the state statistics service said today.

Russia’s economy contracted by 1.2 percent in the first quarter of this year compared with the same quarter last year, in a tentative sign of stabilisation, the state statistics service said today.

The latest GDP figures compared favourably to the 3.8 percent contraction in the last quarter of 2015 and were better the forecast by Economy Minister Alexei Ulyukayev who had expected a decline of 1.4 percent in the first quarter.

Russia has seen its economy slump into a profound recession, partly on the back of the fall in oil prices and Western sanctions over Moscow’s role in the Ukraine conflict.

London’s Capital Economic consultancy said the year-on-year figure confirmed “the acute phase of the crisis is now over.”

“The annual growth rate could return to the positive territory towards the end of the year,” it said in a note to clients. “Even so, the recovery looks set to be disappointing.”

Oleg Kouzmin, Renaissance Capital’s economist for Russia and CIS countries, agreed that the figure was better than the market had expected.

“It suggests to us that the second adjustment of Russian economy to weaker oil prices in 2016 is going easier than it was suggested initially,” he told AFP.

“The possible reasons are that Russia did take the most part of adjustment last year — hit also by sanctions — and now a weaker currency and normalised balance of payments, with subdued capital flows, help to soften the impact of oil price falling again.”

He said however that full-year growth was likely to turn positive only next year.

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