Russian economy in the red as investment slumps and capital flies

Now Reading:

Russian economy in the red as investment slumps and capital flies

Text size Aa Aa

Russia’s economy shrank in the first three months of this year as investment spending fell and those who could move money out of the country did so in response to the tensions over Ukraine and the threat of sanctions.

GDP was down by 0.5 percent from the final quarter of last year, although it grew by 0.8 percent year-on-year.

Economy Minister Alexei Ulyukayev said the economic situation is “not stable”.

He told the Russian parliament: “In addition to the internal factors that have slowed economic growth, we also have a high level of uncertainty on the global financial markets, serious capital flight and a situation when investors are not ready to make investment decisions given the tense situation in the international arena during the past two months.”

The International Monetary Fund’s growth prediction for this year has already dropped from 1.9 percent to 1.3 percent.

The Russian government has slashed its estimate from 2.5 percent growth to between 0.5 percent and 1.1 percent.

But Russia’s Finance Minister Anton Siluanov is even more pessimistic. One day earlier he said the economy faces “the most difficult conditions” since the global economic crisis in 2008.

In the worst case scenario Siluanov believes GDP may not grow at all this year.

Economists have said the weakness shows Moscow cannot afford a war, or even a prolonged trade war with West.