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Russian GDP Plunges 4.6%
Anna Andrianova
August 10, 2015 — 10:00 AM EDTUpdated on August 10, 2015 — 10:29 AM EDT
For Norway, Oil at $50 Is Worse Than the Global Financial Crisis
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Russia’s economy shrank the most since 2009 after a currency crisis jolted consumer demand, while a selloff in oil threatens to drag the country into a deeper recession.
Gross domestic product contracted 4.6 percent in the second quarter from a year earlier after a 2.2 percent decline in the previous three months, the Federal Statistics Service in Moscow said on Monday, citing preliminary data. That was worse than the median forecast for a 4.5 percent slump in a Bloomberg survey of 18 analysts. The Economy Ministry had projected that output shrank 4.4 percent in the period, calling it “thelowest point” for Russia.
The rout on commodities markets has overshadowed the first signs of stabilization in Russia by hammering the ruble and shaking a country that relies on oil and gas for about half of its budget revenue. The world’s biggest energy exporter is enduring its first recession in six years after the nation’s biggest currency crisis since 1998 and a surge in inflation eroded consumer buying power as sanctions over Ukraine choked access to capital markets.
“While second-quarter growth surprised on the downside, perhaps far more importantly is the fact that the outlook for the Russian economy has deteriorated so far in the third quarter,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail. “The central bank may have to pause the monetary policy easing cycle at a time when local banks are still cut off from external sources of funding.”
Forward-rate agreements are signaling 23 basis points of increases in borrowing costs during the next three months. The Bank of Russia has lowered its key interest rate by a cumulative six percentage points to 11 percent in five steps this year.
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A renewed slide in commodity prices may put the central bank in a bind if it destabilizes the ruble and reignites inflation. Consumer prices rose 15.6 percent in July from a year ago, down from a 13-year high of 16.9 percent in March. The central bank forecasts inflation at 10.8 percent by year-end and says its 4 percent target will be reached in 2017.
Urals, Russia’s export blend of crude, averaged $57 in the first half, down almost 47 percent from the same period a year earlier, according to the Economy Ministry. The ruble has depreciated more than 43 percent against the dollar in the past 12 months, the worst performance globally, according to data compiled by Bloomberg. It traded little changed at 63.97 versus the dollar as of 5:17 p.m. in Moscow.
“Faltering oil prices have increased the risks for the expected economic improvement in the second half,” UralSib Capital analyst Alexey Devyatov said in a report before the data release. “Sharp swings in the ruble rate have hit consumer demand and capital investment.”
Russian GDP Plunges 4.6%
Big Win for Big Putin
Anna Andrianova
August 10, 2015 — 10:00 AM EDTUpdated on August 10, 2015 — 10:29 AM EDT
For Norway, Oil at $50 Is Worse Than the Global Financial Crisis
China Slashes U.S. Debt Stake by $180 Billion, Bonds ShrugRussia’s economy shrank the most since 2009 after a currency crisis jolted consumer demand, while a selloff in oil threatens to drag the country into a deeper recession.
Gross domestic product contracted 4.6 percent in the second quarter from a year earlier after a 2.2 percent decline in the previous three months, the Federal Statistics Service in Moscow said on Monday, citing preliminary data. That was worse than the median forecast for a 4.5 percent slump in a Bloomberg survey of 18 analysts. The Economy Ministry had projected that output shrank 4.4 percent in the period, calling it “thelowest point” for Russia.
The rout on commodities markets has overshadowed the first signs of stabilization in Russia by hammering the ruble and shaking a country that relies on oil and gas for about half of its budget revenue. The world’s biggest energy exporter is enduring its first recession in six years after the nation’s biggest currency crisis since 1998 and a surge in inflation eroded consumer buying power as sanctions over Ukraine choked access to capital markets.
“While second-quarter growth surprised on the downside, perhaps far more importantly is the fact that the outlook for the Russian economy has deteriorated so far in the third quarter,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail. “The central bank may have to pause the monetary policy easing cycle at a time when local banks are still cut off from external sources of funding.”
Forward-rate agreements are signaling 23 basis points of increases in borrowing costs during the next three months. The Bank of Russia has lowered its key interest rate by a cumulative six percentage points to 11 percent in five steps this year.
Rate Pause?
A renewed slide in commodity prices may put the central bank in a bind if it destabilizes the ruble and reignites inflation. Consumer prices rose 15.6 percent in July from a year ago, down from a 13-year high of 16.9 percent in March. The central bank forecasts inflation at 10.8 percent by year-end and says its 4 percent target will be reached in 2017.
Urals, Russia’s export blend of crude, averaged $57 in the first half, down almost 47 percent from the same period a year earlier, according to the Economy Ministry. The ruble has depreciated more than 43 percent against the dollar in the past 12 months, the worst performance globally, according to data compiled by Bloomberg. It traded little changed at 63.97 versus the dollar as of 5:17 p.m. in Moscow.
“Faltering oil prices have increased the risks for the expected economic improvement in the second half,” UralSib Capital analyst Alexey Devyatov said in a report before the data release. “Sharp swings in the ruble rate have hit consumer demand and capital investment.”
Russian GDP Plunges 4.6%
Big Win for Big Putin
that's terrible
