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Russia avoided recession but growth stagnating

Published July 9, 2014 4:22 pm

World economy • Crimean takeover sanctions projected to have "serious influence."
This is an archived article that was published on sltrib.com in 2014, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Moscow - Russia's economy avoided a recession with zero growth in the second quarter even as it remains at risk of stalling, Deputy Economy Minister Andrey Klepach said.

"A technical recession seems to have been avoided," Klepach said in an interview with Interfax in comments confirmed by the ministry's press service. Still, the country faces "a period of stagnation or pause in growth."

Gross domestic product posted zero growth in the April-June period from the first three months, when it shrank 0.5 percent, according to preliminary data. The Economy Ministry had predicted a 0.1 percent drop in the period, according to Klepach. A technical recession is defined as two straight quarters of contraction on a quarterly basis.

The $2 trillion economy is projected to dip in 2014 to the slowest pace since a 2009 contraction in the wake of sanctions levied after President Vladimir Putin's annexation of Crimea from Ukraine. The International Monetary Fund said in April that Russia was already in a recession. The probability of a slump within the next 12 months decreased to 40 percent from 50 percent a month earlier, according to a Bloomberg survey of economists published June 26.

The ruble has lost 3.6 percent against dollar this year, the forth-worst performer among 24 emerging-market currencies tracked by Bloomberg.

With the U.S. and its European allies considering further penalties to press Russia over Ukraine, the measures already imposed are having a "serious indirect influence" on the economy, Deputy Finance Minister Sergey Storchak said Tuesday.

The government predicts the economy will expand 0.5 percent this year after 1.3 percent growth in 2013, the slowest in four years. The Economy Ministry estimates GDP grew 1.2 percent in the second quarter from a year earlier, compared with 0.9 percent in the first three months.

This year's forecast may be upwardly revised, Klepach said, adding that the economy may grow 0.5 percent "but not much more." Capital outflows may be near $100 billion in 2014, according to Klepach.

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