World Economy

Russia GDP to Shrink

Russia GDP to ShrinkRussia GDP to Shrink

Russia’s Economy Ministry expects gross domestic product to shrink by 2.5-2.8 percent in 2015, Economy Minister Alexei Ulyukayev said on Saturday.

“This year as a whole we expect a 2.5-2.8 percent fall in GDP,” RIA news agency quoted him as saying during a visit to Voronezh.

The ministry officially forecasts that GDP will contract by 2.8 percent this year, but Ulyukayev had previously said the decline may be less than this.

Russian Finance Minister Anton Siluanov said on Friday that the country’s tight monetary policy was needed to combat high inflation and that he expected the policy to continue in the “coming years”.

The central bank, which holds its next monetary policy meeting on June 15, has been pressured by some officials to lower its lending rates to help limit the scale of an expected economic contraction.

The economy is seen slipping into recession this year for the first time since the aftermath of the 2008-9 global financial crisis, as western sanctions over the Ukraine conflict dampen investment and weak oil prices eat into export earnings.

Governor Elvira Nabiullina signaled on Thursday that the central bank is likely to cut its benchmark interest rate, currently set at 12.50 percent, at its next meeting.

Ulyukayev, meanwhile, said the central bank has “substantial” room for easing its policy.

But Siluanov said Russia could not afford to soften policy significantly, given that inflation is still high.

Inflation eased in May, according to official data released earlier this week, but still remains high at 15.8 percent.