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Recession reality for Russia

Tuesday, December 02, 2014 - 01:41

The Russian rouble gave up early gains on Tuesday after the Economy Ministry said it expects a recession next year and sees the currency remaining weak. Sonia Legg reports

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The Russian rouble has fallen again - this time down nearly 4% against the dollar. The Finance Ministry has cancelled its weekly treasury bonds auction as a result. Recession too is looming - the Economy Ministry has confirmed it expects GDP to contract by 0.8% next year instead of the 1.2% growth previously forecast The ministry has also cut its forecast for 2015's average oil price by $20 to $80. And it expects an average rouble rate of 49 to the dollar. Dmitry Savchenko, Chief Analyst at Nordea Bank, says he believes the central bank faces a difficult balancing act. (SOUNDBITE) (Russian) CHIEF ANALYST OF NORDEA BANK, DMITRY SAVCHENKO, SAYING: "I cannot rule out the possibility that the central bank has already intervened in order to stop the abrupt fall of the rouble. But if we talk about full-scale interventions, it is absolutely clear now, the central bank is not ready to spend the reserves, as it did earlier in the year." The crisis in Ukraine hasn't spooked international markets as badly as some expected. But Richard Hunter from Lansdown Hargreaves says it still might. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES, HARGREAVES LANSDOWN, SAYING: "It hasn't quite filtered through to the general public yet. But markets are discounting mechanisms - they are trying to double guess what will be happening in the next six to nine months or so, so there could well be some pain to come, particularly if the political situation doesn't improve." It's the oil price which is the biggest worry for Russia. Brent crude fell to $72 per barrel and there's no sign of any significant rise. Some are even suggesting it could bottom out at $60 per barrel - way below Russia's forecast.

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Recession reality for Russia

Tuesday, December 02, 2014 - 01:41