MOSCOW: The International Monetary Fund (IMF) on Thursday announced a less pessimistic forecast for Russia’s economy, predicting no more than 3.4 per cent contraction in 2015 and emergence from recession in 2016.

The IMF had last month predicted that the economy would contract by 3.8pc this year and by 1.1pc in 2016.

“A recession is expected in 2015 followed by a mild recovery in 2016,” the IMF said in a statement released at a presentation in Moscow. “GDP is expected to decline by 3.4pc in 2015 driven by a contraction in domestic demand and weighed down by falling real wages, higher cost of capital and weakened confidence.”

The Russian authorities’ “anti-crisis package has helped to stabilise the situation,” said Ernesto Ramirez Rigo, the head of the IMF’s mission in Russia.

He said Russia’s economy still faces “significant risks mainly caused by oil prices... and of course the geopolitical tensions but at the same time they are mitigated by large buffers.”

“There will be a mild recovery in 2016,” he said, adding that “the medium term outlook is for low growth.”

Russia is currently suffering from the effects of a major currency crisis in 2014 triggered by Western sanctions over the Ukraine conflict as well as the effect of plunging oil prices on its economy dependent on energy exports.

Russians’ spending power and consumption collapsed amid spiralling inflation which forced the Russian authorities to spend some of their reserves on propping up the financial sector and to cut spending.

Published in Dawn, May 22nd, 2015

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