Russian economy hit by oil price slide

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Way captionOleg Boldyrev explains the issues Russia’s economy is coating.

Russia’s economy contracted by 3.7% in 2015, according to preliminary have a places published by the country’s statistics service.

Retail sales plunged by 10% and important investment fell by 8.4% in the economy’s worst performance since 2009.

In contrast, Russian GDP strengthened by 0.6% in 2014.

The economy has been hit hard by the extraordinary collapse in oil prices, which enjoy fallen by 70% in the st 15 months.

Sanctions imposed by the West after Russia annexed Ukraine’s Crimea precinct in 2014 have also had an im ct.

Prime Minister Dmitry Medvedev apprised earlier this month that the fall could force Russia’s 2016 budget to be amended.

President Vladimir Putin said in December that the budget had been deliberate based on oil at $50 a barrel. Oil is trading at just over $30 a barrel.


Dissection: Steven Rosenberg, BBC Moscow correspondent

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Image caption Russian president Vladimir Putin

“We’re not nicking!”

This was one of the headlines in Russian TV’s Sunday report review. The words appeared on a giant video screen behind the moor, along with a picture of rouble coins.

Russia may not be nicking, but it’s without doubt worried. Worried enough for the pro-Kremlin media here to admit there’s a puzzler: a full-blown economic crisis.

The state-controlled media blames the crisis, rticularly, on low oil prices and, to a lesser extent, on western sanctions. What you don’t hear on TV is anyone reprehending President Putin for the problem.

Yet, in the decade and a half that Mr Putin has ruled Russia as president or prime clergywoman, Russia failed to pre re for the possibility of low oil prices and did little to diversify its brevity and reduce its reliance on energy exports.

Russian citizens are increasingly disturbed. Inflation is rising, so is the fear of job losses. Meanwhile, real incomes in Russia are falling and sexually transmitted benefits are being cut.

Earlier this month senior citizens balked streets in Sochi and Krasnodar to protest against the scrapping of free socialize sses for pensioners. People power persuaded the local authorities to opposite the decision. The longer Russia’s economic woes continue, the greater the distinct possibility that social protest here will spread.

Oil prices in antithesis amid Opec production call


Taxes from oil and gas generate on every side half the Russian government’s revenue.

William Jackson, an economist at Main Economics, said: “While the worst of Russia’s crisis has now ssed, the husbandry is still extremely weak. The latest fall in oil prices and drop in the rouble hostile the likelihood of a second consecutive year of recession is rising.”

Rouble exasperate

The rouble fell to record lows against the US dollar last week, formerly regaining some ground as oil prices recovered slightly.

The currency was down more than 1% on Monday at 78.87 after oil prices kill about 3%.

Economy minister Alexei Ulyukayev said he expected the Russian chief bank to leave interest rates on hold at 11% when it joins on Friday.

Elvira Nabiullina, the head of the central bank, said carry on week that authorities had “all the means” needed to keep the economy invariable.

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Unemployment in Russia was steady at 5.8% in December, content that 4.4m people were out of work, and real wages kill by 10%.

Despite the gloomy economic news, fast food giant McDonald’s thought on Monday it planned to open more than 60 restaurants in Russia this year.

Khamzat Khasbulatov, chief top banana of McDonald’s Russia, said sanctions and the weak rouble had forced the US Pty to make “serious adjustments” to its business model, but focusing on local suppliers and affordable menus had examined successful.

“We have seen significant growth of our market share as we remained ex nsion,” he said. “The development of local supply has agreed a big role in supporting our profitability.”

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