The World Bank on Wednesday downgraded its outlook for Russia's economy, warning that a biting recession is deepening and will persist into next year.
The World Bank predicted the Russian economy will shrink by 3.8% in 2015 in its baseline scenario, far worse than its earlier forecast of a 2.7-% contraction. The downturn this year could be as much as 4.3%, AFP reported.
"This will accelerate an already troubling rise in the poverty rate," said the bank's country director for Russia, Andras Horvai.
The Bank ditched its earlier forecast of a gentle recovery with 0.7-% growth in 2016. It now expects Russian economic output to decline 0.6% next year, with a recovery only appearing in 2017 with growth of 1.5%. "The recession is having a severe impact on households as double-digit inflation erodes real wages and incomes," the World Bank said, citing "sharply increasing" poverty rates.
"The current recession is expected to reverse recent progress in poverty reduction and threatens shared prosperity achievements of the last decade," the bank said.
Russia experienced a "dramatic contraction in real wages and income" in the first half of 2015, especially for public sector workers whose real wages fell by 10%, according to the Bank's report.
As a result, the poverty rate has climbed to 15.1%, representing 21.7 million people, in what World Bank called a "troubling rise" exacerbated by increasing food prices.
In some regions, more than 35% of the population live in poverty, it said. The World Bank forecasts assume western sanctions against Moscow remain in place.
