The Russian economy has shrunk
The Russian economy has contracted for the first time in five years after falling oil prices and sanctions imposed by western governments began to take their toll.
The prospects for the country’s economy are expected to remain weak after President Vladimir Putin’s government revealed that GDP in November was 0.5% lower than in the same month a year ago.
It is the first time since October 2009 that the Russian economy has shrunk and comes at a time when the rouble has been collapsing on foreign exchange markets after a near halving of the oil price since June.
Manufacturing, construction, agriculture and service sectors all contracted in November, although energy, mining and the retail trade showed continued growth.
Economists are warning that Russia – one of the world’s biggest energy exporters – could be facing its first recession in five years. The central bank fears the economy could shrink by up to 4.8% next year if oil prices fail to recover from five-year lows.
The repercussions are starting to be felt. A week ago Russia’s central bank threw a £340m lifeline to Trust Bank – a Moscow bank that uses the Hollywood star Bruce Willis to advertise its credit cards – and the government has agreed to a 1tn-rouble recapitalisation of the nation’s banks.