Russia’s Battered Economy Is Improving – World Bank

Russia’s Battered Economy Is Improving – World Bank
Central Europe, 1871 Gabriel / Flickr CC BY 2.0
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The economy of sanctions-riddled Russia is improving, according to the latest outlook released by the World Bank on Monday. Although key drivers deeply deteriorated in April, the WB said Russia will shrink to only 2.7 percent this year, from a previous 3.8 percent. In 2016, it will return to a growth of 0.7 percent.


In 2017, Russia will continue to grow by 2.5 percent, WB added. Data officially released by the Russian government showed the country’s gross domestic product shrank by 1.9 percent in the first quarter of 2015 compared from a year ago.

Birgit Hansl, World Bank lead economist for Russia, said oil price adjustment in the past two months largely influenced the revised forecast. The adjustments highly supported the ruble exchange rate, Hansl said. The positive development, Hansl noted, would now allow Russia’s central bank to pursue monetary easing “at a more rapid pace” for the rest of 2015.

“This would bring down borrowing costs and increase lending to firms and households.”

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Oil prices have jumped back up to $60-65 a barrel after dropping dramatically between June 2014 and January to as low as $45. Oil prices are projected to jump and hit $63.6 per barrel in 2016.

Hansl said consumption will drop in 2015 and 2016, a carry-over of movements in 2014.

Investment activity would recover slowly in 2016 and more prominently in 2017, contingent on a removal of lingering structural problems and improvement in business and consumer sentiments, as sanctions are expected to phase out by the end of 2016.”

Apart from the WB, the International Monetary Fund has likewise improved its outlook for Russia. It said the country will experience a 3.4 percent contraction this year and grow by 0.2 percent in 2016. It earlier said in April Russia’s economy will contract by 3.8 percent in 2015 and continue further by 1.1 percent in 2016.