Russia’s economy ministry said on Saturday it expected gross domestic product to fall 3% in 2015

  • This is more optimistic than many analysts’ forecasts of a 4-5% drop
  • The new growth prediction was contained in macroeconomic forecasts used by the government for budget plans
  • In its new forecasts, it now assumes an average oil price of$50 per barrel this year (assumption was $80 in their previous forecasts issued in December … thie revision in December also forecast GDP for 2015 at -8%)
  • The Russian economy has been hit by a sharp fall in oil prices (oil and gas account for about two-thirds of Russia’s exports and half of federal budget revenues) and by sanctions imposed on Moscow for its role in the Ukraine crisis

More at the article, here

  • Note … on Friday Russia’s central bank unexpectedly cut its main interest rate
  • The bank reduced its one-week minimum auction repo rate by two points to 15% (a month ago it pushed it up by 6.5% to 17% after a run on the rouble)

Says Reuters:

  • The move implies a shift in the Bank of Russia’s priorities away from clamping down on rising inflation and supporting the rouble, towards trying to support economic activity, which the bank expects to fall sharply in the coming months
  • The decision will also fuel speculation that recent changes in the bank’s senior management have shifted the bank towards more dovish monetary policy, possibly under pressure from the Kremlin, banks and business lobbies
  • “Today’s decision to lower key interest rate by 2 percentage points is intended to balance the goal of curbing inflation and restore economic growth,” the bank’s governor, Elvira Nabiullina, said in an emailed statement after the announcement