Russia GDP seen down 3.8 percent in 2015, minus 0.3 percent in 2016

MOSCOW (Reuters) - Russia’s economy is expected to shrink by almost 4 percent this year and contract further in 2016, a Reuters poll of analysts showed on Thursday, as global oversupply weakens prices for its oil exports.

A sculpture of a double-headed eagle, a national symbol of Russia, is seen in front of a Russian national flag flying at half-mast on the roof of the State Hermitage Museum in St. Petersburg, Russia November 1, 2015. REUTERS/Peter Kovalev

The poll predicted that gross domestic product (GDP) would fall by 3.8 percent in 2015 and 0.3 percent next year, as domestic demand remains weak. The previous poll saw GDP in the world’s top oil producer growing 0.3 percent in 2016.

Analysts are basing their forecasts on an average oil price of $50 per barrel next year, up from around $37 on Thursday, but warn of deeper recession if low oil prices persist.

Dmitry Polevoy, an analyst at ING in Moscow, said the Russian economy may shrink by 1.5-2 percent next year if oil prices reach $30-$35 per barrel, the level Russian oil firms are now testing in their stress scenarios.

Echoing worries about the oil price, Russian President Vladimir Putin said on Thursday that Russia should be ready for a prolonged period of low oil prices.

“The only hope (for the domestic economy) are some stimulus from further rate cuts by the CBR (central bank),” Bank St Petersburg economist Olga Lapshina said.

Russia’s central bank left its main interest rate on hold at 11 percent in December, reiterating it would consider a cut if inflation slows in line with its forecast.

Eight out of total 12 analysts polled by Reuters expect the central bank to cut its key rate by 50 basis points to 10.5 percent at its next meeting in January.

Analysts see only one cut in the first quarter, expecting the bank to reduce the key rate gradually to 8.5 percent by end-2016.

Inflation is expected to fall to single digits in the first quarter of 2016, the poll shows, from 13 percent expected by end-2015. At the end of next year, inflation is seen at 7.9 percent.

The rouble, which is trading in close correlation with oil, is expected to average 69.4 per dollar over 12 months and 69.9 over six months if oil prices are around $50 per barrel.

“We expect rouble weakness to continue on a more moderate path than we saw over the past 12 months, supported by fewer FX debt redemptions... and by a solid current account surplus”, Danske Bank trading strategist Vladimir Miklashevsky said.

Reporting by Kira Zavyalova; Editing by Katya Golubkova/Ruth Pitchford