Sanctions may shave 9% off Russia's GDP

Moscow - Russia's economy is showing signs of stabilisation after slumping under pressure from Western financial sanctions and Russian counter-measures.

Sanctions linked to the Ukraine crisis could end up costing Russia nine per cent of its gross domestic product, the International Monetary Fund said on Monday.
Russia's economy is showing signs of stabilisation after slumping under pressure from Western financial sanctions and Russian counter-measures.
Low international prices for its oil exports have added to pressure on the rouble and government finances.
"The effects of sanctions in terms of external access to financial markets and new investment technology will linger," the Fund said, summing up the findings of a mission in May.
Last year, Western countries imposed restrictions that limit international financing for major Russian banks and energy companies, and also high-tech exports to the energy sector. Russia retaliated by banning imports of most Western food products.
The IMF estimated the immediate effect of sanctions and counter-sanctions had been to wipe between one and 1.5 per cent off GDP, rising to nine per cent over the next few years.
These model-driven results were subject to significant uncertainty, it cautioned.
The IMF also forecast "weak" economic growth of around 1.5 per cent annually in the medium term. Russia's economy was growing around seven per cent a year before the 2008 global financial crisis.
"Slow-moving structural reforms, sluggish investment and adverse population dynamics are all part of the picture," it said, reiterating its long-standing advice for Russia to reduce the role of the state in the economy, protect property rights and boost competition.
Russia would nevertheless return to economic growth next year as a weaker rouble boosted competitiveness, external demand increased and domestic financial conditions normalised, the IMF said.
It predicted 0.2 per cent growth next year following a 3.4 per cent contraction this year, in line with its previous forecasts.
Inflation was seen slowing to around 12 per cent by the end of this year and eight per cent by the end of next year - more pessimistic than the central bank's forecast of seven per cent by mid-2016.
The IMF said the central bank's policy of gradually reducing its main interest rate in line with underlying inflation was appropriate, but the pace of reductions needed to be "prudent".
It supported limited fiscal stimulus this year, but added: "An ambitious and credible medium-term fiscal consolidation programme is necessary to adjust to lower oil prices."