EC lowers Russia's "rather bleak" outlook to 1.2% GDP decline in 2016

By bne IntelliNews February 4, 2016

The European Commission (EC) has worsened its recession outlook on Russia for 2016 from 0.5% GDP decline to 1.2% contraction, with a return to "very weak growth" of 0.3% only in 2017, according to the Winter Outlook published on February 4.

The EC joins an array of institutions and analysts that revised Russia's outlook downwards in 2016 due to a renewed decline in oil prices, while Russia has yet to officially revise its 2016 macro guidance from 0.7% GDP recovery expected.

The EC believes that the 2015 recession caused by the slump in oil prices, sanctions and pre-existing structural bottlenecks, has recently bottomed out. However, the outlook has deteriorated since the autumn due to oil's continued decline and the prolongation of sanctions.

Real GDP is estimated to have contracted by 3.7% in 2015 due to a sharp decline in private consumption and investment, facilitated by elevated borrowing costs, weak economic confidence and rising inflation, the EC reminds.

The EC data seems slightly outdated, as it cites moderation of third-quarter data as a sign of the recession bottoming out, without reference to the decline in investment and consumption recently reported for the end of 2015.

Nevertheless, the near-term outlook remains "rather bleak", much so that “risks of protracted stagnation now prevailing over prospects of a gradual recovery”, due to a significant downward revision of oil price outlook, sanctions' extension until July 2016, weak business sentiment, persistently high borrowing costs, and a likely lack of structural reform momentum ahead of elections, the report sums up.

Further more-than-expected decline in oil prices and the prolongation of the sanctions “beyond summer 2016” are seen as main risks to the outlook, which might indirectly indicate that the EC does not consider the prolongation as a base-case scenario.

Related Articles

Russia's Detsky Mir children's retailer announces IPO

Russian retailer of children’s goods Detsky Mir announced plans to offer 30% of its shares in an IPO, TASS reported on January 16. The retailer’s main shareholder, AFK Sistema multi-industry ... more

bnePodcast - WoE: How far will the Russian equity rally run, with Jacob Grapengiesser, partner at East Capital and Russian Fund manager

This edition of bne's Window on the East podcast features Jacob Grapengiesser, a founding partner ... more

Russian shipping convoy makes first winter crossing of Northern Sea route

A convoy of Russian ships crossed the Northern Sea route westwards for the first time in winter conditions, the state-controlled shipping company Sovcomflot reported on January 10. The 3,860 ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss