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MOSCOW Aug 22 Russia's economy has contracted
in annual terms for two months in a row, the Economy Ministry
said on Friday, adding to concerns that Russia may be heading
for recession as western sanctions over Ukraine bite.
In a weekly macroeconomic monitoring report, the ministry
estimated that gross domestic product had contracted by 0.2
percent in July compared with a year earlier, following a 0.1
percent fall in June.
The ministry's estimate of negative growth in June as well
as July contrasts with its earlier estimate of 0.6 percent
growth in June, following 1.3 percent growth in May.
"It's quite a sharp revision," said Dmitry Polevoy, chief
Russia economist at ING. "Generally this is a worrying sign
suggesting that the economy is continuing to lose steam."
The ministry's gloomy growth estimates come a few days after
data published by the State Statistics Service showed investment
declining by 2 percent in July - resuming a downward trend
briefly interrupted in June - and retail sales rising by a
sluggish 1.1 percent.
The government officially forecasts economic growth of 0.5
percent in 2014, although Economy Ministry officials have said
in recent weeks that they expected growth around 1 percent.
ING's Polevoy said that the latter figure looks harder and
harder to achieve. Year-on-year growth was 0.7 percent in the
first seven months, the latest ministry data showed, with the
growth rate set to shrink as the economy begins to contract.
"The risk of negative annual growth in GDP (in 2014) is
still high, and these risks are probably rising on the back of
geopolitical tensions," he said.
The decline in economic growth has coincided with a surge in
capital outflows and slumping investment, linked by analysts to
the Ukraine crisis and the impact of western sanctions.
Economists polled by Reuters at the end of last month
predicted that the economy would grow by just 0.3 percent in
(Reporting by Jason Bush and Maria Kiselyova)