Russia warns of recession in 2015

BLACKEAGLE

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The Russian government has warned the economy will fall into recession next year as Western sanctions, in response to its role in eastern Ukraine, and falling oil prices begin to bite.

Russia's economic development ministry estimates the economy will contract by 0.8% next year.

It had previously estimated the the economy would grow by 1.2% in 2015.

Russia's reliance on tax revenues from the oil industry makes it particularly sensitive to price movements.

Household disposable incomes are also forecast to decline by as much as 2.8%, compared with a previous estimate that they would grow by 0.4%.

The sharp revision in Russia's economic forecast is the first admission from the government that the economy will contract.

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Russia is a non-investible country for all but the bravest of hedge fund investors right now, and will remain in this category until both the rouble and oil stabilise at minimum”

Chris Weafer Macro-Advisory
"The current prognosis is based on a drop in GDP by 0.8% in 2015, against the previous prognosis of growth by 1.2%," deputy prime minister Alexi Vedev said.

Budget
On Monday, the rouble suffered its biggest one-day fall since 1998.

The currency slid almost 9% against the dollar before rallying after suspected central bank intervention. The currency has already lost 40% in value this year.

The Russian finance ministry has also not ruled out spending more than 500 billion roubles from the budget's Reserve Fund next year.

The 2015-2017 budget allows for spending of up to 500bn roubles (£5.9bn) next year from the Reserve Fund, but Maxim Oreshkin, head of the finance ministry's long-term strategic planning department, said it was possible the government could spend more to support the economy.

He added that if the average oil price were $80 per barrel in 2015, the finance ministry's forecast for a fall in GDP was in line with the economy ministry's prediction of a 0.8% contraction.

He also said that a scenario in which the oil price averaged $60 a barrel in 2015 was pessimistic, and at that price, the Russian economy would contract as forecast in the central bank's "stress scenario".

'Damage'
The bank published its stress scenario last month, saying that at $60 per barrel, GDP would decline by 3.5% to 4%.

"The real damage from the collapsing rouble and oil price is to investment and growth,'' said Chris Weafer, senior partner at Moscow-based Macro-Advisory, in a note to investors.



"Russia is a non-investible country for all but the bravest of hedge fund investors right now, and will remain in this category until both the rouble and oil stabilise at minimum."

The price of oil has fallen nearly 40% since the summer because of oversupply caused by rising US shale oil production.

Demand has also fallen, particularly in China, the world's second largest consumer of the commodity, where industrial production has slowed in recent months.

Last week, Opec ministers met to discuss a possible cut in oil production in order to stabilise the oil price, but the meeting broke up without agreement.

Opec secretary general Abdallah Salem el-Badri said: "There's a price decline. That does not mean that we should really rush and do something."

The fall in the oil price has been causing concern for several members of the oil cartel, as most require a price above $80 a barrel to balance their government budgets and many need prices to be above $100 a barrel.

BBC News - Russia warns of recession in 2015
 
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I seem to remember Putin saying that our sanctions wouldn't have any far reaching consequences or something along those lines. I wonder how long it is going to take before the people will start demanding some answers for this recession. They were just starting to get a little more comfortable in Russia.
 
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Winter is coming for Russia. I hope the people will get food so they don't starve to death.
 
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Winter is coming for Russia. I hope the people will get food so they don't starve to death.
Should we cue Ned Stark leaning on his sword here? I think they might already have the dire wolves... or at lease Putin's tiger.
 

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The thing is that it is not the people of Russia who are the problem. The problem lies solely with Putin and the government. Do you think the everyday citizen of Russia even knew that the invasion was going to happen? Things are going to get a lot worse for the Russians before they get any better.
 
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The thing is that it is not the people of Russia who are the problem. The problem lies solely with Putin and the government. Do you think the everyday citizen of Russia even knew that the invasion was going to happen? Things are going to get a lot worse for the Russians before they get any better.
That's what I mean. The everyday Russian person had no idea. So how long do you think it's going to be before they are hopping mad at Putin for putting them in this situation? I don't think it will take long before they are going to be like "oh wait one damn minute here. We did not want this." Bearback Putin may not be holding his position in government for long.
 

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I guess time will tell. There was another thread, I think it was here, about how long it would take before the Russians protest like the Greeks did. The Greeks didn't have the threat of imprisonment hanging over their heads if they disagreed with the government though.
 
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I guess time will tell. There was another thread, I think it was here, about how long it would take before the Russians protest like the Greeks did. The Greeks didn't have the threat of imprisonment hanging over their heads if they disagreed with the government though.
Yes, the Greeks did have more free will. However, we do always underestimate the power of people in numbers. We have see mighty leaders tumble when larger numbers of people decided to start an uprising in the recent past.
 
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Crude is down to around 56 USD per barrell. Each of those countries listed in that graphic in the article is taking a serious hit with the price of oil being what it is. Eventually it will rebound and we'll be back paying $3.50 for a gallon of gas again but it's going to be tough for the common citizen to make it in all of those countries while oil is taking the hit.

We need to start looking at alternative energy sources to become less dependent on oil. It has served a purpose of a long time but with technology being what it is now, we need to find a better solution because eventually it will run out (not in my lifetime - but I have 3 kids who I worry about).

I know I sound like an advertisement for Al Gore but something needs to happen, it doesn't have to be overnight wholesale change but something slow and gradual so more people can jump on the wagon.
 
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Crude is down to around 56 USD per barrell. Each of those countries listed in that graphic in the article is taking a serious hit with the price of oil being what it is. Eventually it will rebound and we'll be back paying $3.50 for a gallon of gas again but it's going to be tough for the common citizen to make it in all of those countries while oil is taking the hit.

We need to start looking at alternative energy sources to become less dependent on oil. It has served a purpose of a long time but with technology being what it is now, we need to find a better solution because eventually it will run out (not in my lifetime - but I have 3 kids who I worry about).

I know I sound like an advertisement for Al Gore but something needs to happen, it doesn't have to be overnight wholesale change but something slow and gradual so more people can jump on the wagon.
We do have other solutions for cars. They are sitting in other countries right now. The hydrogen car is an example. I have and E85 car. I am lucky enough to have 2 gas station in my town that sell that fuel. However, there are none close to my job and only one other gas station on the way to where I drop my daughter off for visitation with her father.
 

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Russia eventually had to admit that they face some tough times ahead. But they make the problem appear mild. The economy will contract by 0.8%?

That's a lie. Oil prices will keep dropping for an indefinite time. And as those prices drop, Russia's economy will also feel the impact. They may lie to their people for a little while but sooner or later the Russian's will learn their government has been lying to them and demand for explanations.
 
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I am still confused about Russia's move on Ukraine, with the economic sanctions that the world has imposed on them, they have billions losses, so I am still to understand how invading Ukraine makes it up for that.
 
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Hopefully they will stop at Ukraine. It's pretty scary if they want to absorb other minor countries aswell . The economic sanctions are indeed tough but Russia will most likely recover, that and the crisis in the middle east makes up for a lot of noise considering world affairs.
 
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Russia's economy isn't doing well and may be on the verge of a recession. However, the article frames US sanctions as the main reason for this. I think that's untrue. Before oil prices began their rapid slide, the media was reporting that the effect of US and EU sanctions on the Russian economy was not being felt at all. There was a sentiment that Russia had changed its focus to Asia and was no longer dependent on the West.

Only after all this, did oil prices begin to fall rapidly, the fatal blow being OPEC's decision not to cut production and this caused economic turmoil in Russia, Venezuela, Iran and others. After these events, the Rouble slipped into freefall. Yet US sanctions are increasingly used alongside a drop in oil prices as the cause for the faltering Russian economy in defiance of causality.
 

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