BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/31
Alexei Kudrin, who served as finance minister from 2000 to 2011, expects the economic contraction to continue in the fourth quarter of this year, even if more slowly than until then, and growth to return in the first half of 2016. Kudrin noted that the drop in economic output accelerated in the second quarter of this year, adding that fixed capital investment continued to fall much.
Observers note that expectations of recovery have moderated as more recent figures on the deepening of the economic contraction have emerged. The economy ministry estimates GDP in the second quarter was 4.4 % lower than a year earlier, even if seasonally adjusted GDP only contracted slightly in June.
The oil price has also declined, after recovering from the plunge of the second half of 2014 to around $65 a barrel in early May. The latest slide sharpened at the end of June. This week the Urals price dipped below $55/bbl.
The drop in oil prices and financial uncertainty in China especially since mid-June have eroded exchange rates in other emerging economies as well as the ruble’s exchange rate which this week was down about 15 % from end-May against both the euro and the dollar.
On Tuesday (July 28), the CBR, citing increased market volatility, suspended its daily forex buying on Russia’s forex market. The CBR in mid-May initiated the buying policy in order to gradually rebuild the country’s foreign currency reserves. From the standpoint of the ruble’s exchange rate, the currency buying, usually $200 million a day, has had no decisive impact.
Ruble exchange rates and CBR forex sales on Russian market
Source: Central Bank of Russia