The recession deepens in Russia – Puls Biznesu

On Monday declined a rate of the Russian currency; the dollar on the Moscow stock exchange were paid almost 63 rubles, and the euro – more than 69 rubles.

“Although it has been growth in the second quarter was surprisingly weak, then – more importantly – the forecast for the Russian economy worsen in the third quarter, “- said in an interview with Bloomberg strategist at Rabobank in London branches Piotr Matys.

” The central bank (Russia) might need to suspend easing of its monetary policy and this at a time when local banks are still cut off from the outside financing “- Matys added.

The government meanwhile hoped that GDP will shrink by 4.4 percent. How did the AFP, the Russian authorities have repeatedly insisted that the worst is over and a slight recovery will occur in the next quarter, growth in 2016 will amount to more than 2 percent.

This optimistic scenario is unlikely – says AFP – if we take into account the recent declines in oil prices, which again dragged down the ruble exchange rate.

The International Monetary Fund recently announced that it expects that Russia will enter this year in a deep recession, and until next year the economy slightly to tease.

“The slow implementation of structural reforms, sluggish investment and a negative trend (declining) population worsen the overall picture (of the economy),” – said the fund, which he repeated on the occasion of their recommendations for reducing the state’s role in the economy and increase its competitiveness.

Last week, the newspaper “Vedomosti” wrote that the fall in oil prices on world markets increases the risk that the recession in Russia will be chronic in nature.

In the past two Months oil became cheaper by almost 25 percent. The ruble from May depreciated about 15 percent.

The Bank of Russia has already declared last week that there is a risk of “significant slowdown” of the economy. On Monday assured, however, that the Russian financial system “is not threatened.”

In December 2014 years the central bank raised its key interest rate up to 17 per cent., To prevent the collapse of the exchange rate of the Russian currency, which fell quotes instantly from due to the depreciating oil and economic sanctions imposed on Russia in connection with its aggressive policy towards Ukraine.

This de facto currency crisis currently translates into a deep recession caused by the collapse in demand, which in turn is derived from soaring prices. A decline in demand makes it slows down industrial production – says AFP.

However, maintaining a high level of interest rates makes the market dries up the availability of credit. Experts have warned for some time that the Bank of Russia will be in this situation had to choose between cutting interest rates, which would help Russian businesses, and keeping them at a high level to curb the trend of a drop of the ruble and rising inflation. Higher interest rates usually affect the appreciation of the currency and reducing inflation.