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Russia’s economy suffers another blow

Wednesday, October 01, 2014 - 01:58

The International Monetary Fund has halved its forecast for Russia's 2015 gross domestic product to 0.5 percent. As David Pollard reports, it says international tensions have created downside risks to its estimates.

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It's always been a fragile ceasefire but the latest attack in Ukraine makes it even more so. At least 10 people were killed when shells hit a school playground and a public mini-van in Donetsk. No children were among the dead - teachers led them to a cellar just in time. It all raises questions about what's next in Ukraine and Russia. Western sanctions - and Moscow's retaliatory ones - are hurting. The IMF's just halved its forecast for Russia's 2015 GDP to just 0.5 percent. The head of the IMF mission to Russia is Antonia Splilimbergo. (SOUNDBITE) (ENGLISH) HEAD OF IMF MISSION TO RUSSIA, ANTONIO SPILIMBERGO, SAYING: "Geopolitical uncertainties are having a big effect on the Russian economy directly - sanctions/counter-sanctions - but also indirectly because they increase grossly the uncertainty". The IMF is also urging Russia's central bank to tighten its monetary policy, predicting inflation will top 8% this year. It leaves investors very nervous, says IG's Alastair McCaig. (SOUNDBITE) (English) MARKET ANALYST AT IG, ALASTAIR MCCAIG, SAYING: "The commentary we've heard out of Russia over the last twenty-four hours will once again raise question marks over companies that do business with Russia, sell to Russia and also are considering moving into Russia, especially when you consider the dollar-rouble exchange rate looking very much like it's going to hit that 40 Rouble mark imminently." The prospect of restrictions on cash and fund transfers is also worrying many - even though Moscow is only talking about doing that. (SOUNDBITE) (English) MARKET ANALYST AT IG, ALASTAIR MCCAIG, SAYING: "The sheer fact that they're discussing it will see many assume that it's only a matter of time rather than if it will come to fruition." Russia is clearly aware of the risks. Its Central Bank says it's working on measures to support the economy should oil fall by a third. They call it a "stress scenario" based on a barrel at $60. That could have quite an impact. Last week Russia adopted its state budget for the next three years based on a price tag of $100 a barrel.

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Russia’s economy suffers another blow

Wednesday, October 01, 2014 - 01:58