Ex-minister says Russia entering ‘full blown economic crisis’

PanARMENIAN.Net - Russia's former finance minister has warned the country is entering a "full blown economic crisis" and will enter recession next year.

"We are entering or have already entered a full-blown economic crisis, and we're going to feel it to the full next year,'' said Alexei Kudrin, according to BBC News.

His warning came as Russia's central bank lent Trust Bank 30bn rubles to stop it going bankrupt. It marks Russia's first bank bailout since the ruble's sharp collapse.

The Russian currency has lost more than 45% of its value against the dollar since the start of the year, with falling oil prices and Western sanctions both weighing on the country.

Despite the sharp fall, deputy prime minister Igor Shuvalov indicated the government would not intervene, saying the government "opposes'' currency controls as a way to tackle the ruble crisis, and sees “more harm in them” than potential advantages.

Russia's central bank has already tried unsuccessfully to stabilize the currency, buying rubles in the markets and raising its main lending rate to 10.5%.

But those efforts have been overwhelmed by the fall in the price of crude oil - one of the country's main exports - and by concerns that international sanctions over Ukraine might be stepped up.

On Monday, Dec 22, Kudrin said even if the price of oil, currently trading at around $62 a barrel, rose to $80 a barrel the Russian economy would still contract by at least 2%. If oil remained at around its current level he said the economy would shrink by 4%.

"This is a serious challenge to the economy," he said.

He calculated that low oil prices, accounted for as little as a quarter of the ruble's decline, with western sanctions against Russia accounting for 40%.

The Russian government warned earlier this month that the country would fall into recession next year as western sanctions and falling oil prices began to bite. Its economic development ministry estimated the economy would contract by 0.8% next year, compared to its previous estimate of 1.2% growth.