MOSCOW: Russia’s economy minister Alexei Ulyukayev on Saturday forecast GDP to fall by 3 per cent in 2015 on the back of a collapse in oil prices and a massive capital flight.

“We have issued a forecast for 2015 which uses the current prices, that is $50 dollars a barrel for the entire year,” Ulyukayev was quoted by Russian news agencies as saying. Ulyukayev emphasised that his prediction of a 3pc contraction was “conservative” given that most analysts forecast oil prices to recover later this year.

The economy ministry had previously forecast a 0.8pc fall in output, but some economists had said that the contraction could be as big as 5pc, depending on the price of Russia’s main export commodity.

Russia’s central bank has forecast a 4.8pc shrinkage.

Russia has been hit by a double whammy of tumbling oil prices and Western sanctions that have closed off the economy from foreign borrowing. The Russian rouble has fallen by half against the dollar and the euro since the beginning of last year, leading prices to rapidly rise.

As a result of the economy’s demise, capital flight last year shot up to $150 billion — a record since the fall of the Soviet Union.

Ulyukayev said the figure this year was expected to reach $115bn, and that investment would fall by 13pc.

Inflation predictions have also been revised upwards for the current year, from 7.5pc to 12pc, news agencies cited the minister saying.

January inflation will be 13.1pc, he said. Real wages will fall by over 9pc over the year, he added. The government has unveiled a series of measures to shore up the economy, including increasing financing to banks and boosting spending on pensions and unemployment programmes.

On Friday, the central bank announced a surprise reduction of its key interest rate from 17pc to 15pc, which it said aimed at “averting the sizeable decline in economic activity”.

Published in Dawn, February 1st, 2015

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