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Russia says recession-hit economy shrank 4.3% in third quarter


Moscow : Russia’s economy shrank 4.3 per cent in the third quarter this year, the government said today, as a recession caused by low oil prices and Western sanctions over Ukraine continued to take its toll.

Deputy economy minister Alexei Vedev told Russian news agencies that preliminary estimates put the year-on-year drop in gross domestic product for the third quarter at 4.3 per cent, slowing to 3.8 per cent in September from 4.6 per cent in August.

Officials in Russia are struggling to breathe life into the economy as the ruble has dropped precipitously in value and inflation and poverty have risen sharply.

Overall, the economy dropped 3.8 per cent for the first nine months of the year, Vedev said.

Russia’s government estimates that the economy will shrink by some 3.9 per cent in 2015 before recovering slightly by 0.7 per cent in 2016.

The World Bank last month predicted the Russian economy would shrink by 3.8 per cent in 2015 in its baseline scenario, a far steeper drop than an earlier forecast of a 2.7-per cent contraction.

The downturn in 2015 could be as much as 4.3 per cent if oil prices continue to drop and average around USD 50 dollars a barrel for the year, the bank said.

The bank ditched its earlier forecast of a gentle recovery with 0.7 per cent growth in 2016. It now expects Russian economic output to decline 0.6 per cent next year, with a recovery only appearing in 2017 with growth of 1.5 per cent.

The poverty rate has climbed to 15.1 per cent, representing 21.7 million people, in what the World Bank called a “troubling rise” exacerbated by increasing food prices.

In some regions, more than 35 per cent of the population live in poverty, it said.

The International Monetary Fund estimates that Western sanctions imposed on Moscow over its meddling in Ukraine could cost Russia some 9 per cent of GDP in the medium-term.

Ratings agency S&P said last week that the outlook for Russia’s recession-hit economy remains weak, predicting it would only expand by about 0.4 per cent annually between 2015 and 2018.

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