The energy export-reliant Russian economy has been hit hard by the global slump in oil prices, official data released Monday showed. Russia’s economy contracted by 3.7 percent in 2015, after expanding 0.6 percent in 2014, according to preliminary figures published by the country’s official statistics service Rosstat.
The figure, which marks the country’s worst economic performance since 2009 — when the world economy as a whole was suffering from the effects of the financial crisis — is in line with an earlier official estimate cited by President Vladimir Putin at his annual press conference in December.
Retail sales plunged 10 percent in 2015, including a 15.3 percent drop in December over the same period a year earlier, and capital investment fell by 8.4 percent, as the economy reeled under a double whammy of falling oil prices and sanctions imposed by the West after Russia annexed Crimea in 2014.
“The economy’s going through big adjustments — it’s still addicted to oil,” Vladimir Miklashevsky, a strategist at Danske Bank in Helsinki, told Bloomberg. “The weak ruble and import substitution will continue to support local production, although on a moderate path. It’s a long and painful journey to recovery.”
The ruble has lost over 7 percent of its value against the dollar this year, and is expected to lose another 10 percent to 15 percent in the coming months, even if the drop in oil prices is arrested. Earlier this month, Russian Prime Minister Dmitry Medvedev warned that that a further drop in oil prices, could force the country’s 2016 budget — calculated based on oil at $50 a barrel — to be revised.
Oil and gas generate about half the Russian government’s revenue. Given the current price of the global oil benchmark Brent Crude — which is trading at just over $31 a barrel — the likelihood of a second consecutive year of recession remains extremely high.
“It’s very unlikely that we’ll witness a V-shaped recovery due to the prospect of lower-for-longer oil prices and the ongoing contraction in domestic demand,” Piotr Matys, a strategist for emerging-market currencies at Rabobank in London, told Bloomberg.