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Russian Federation: Staff Report for the 2015 Article IV Consultation

2015; International Monetary Fund; Volume: 15; Issue: 211 Linguagem: Inglês

10.5089/9781513502441.002

2227-8907

International Monetary Fund,

Economic and Technological Developments in Russia

Russia entered 2014 with declining potential growth owing to the stabilization of oil prices, stalled structural reforms, weak investment, declining total factor productivity and adverse population dynamics.In addition, the ongoing slowdown was exacerbated by the dual external shocks from the sharp decline in oil prices and sanctions.The authorities took measures to stabilize the economy and the financial system.The sharp decline in oil prices and sanctions led to severe pressure on the ruble, a surge in inflation, market turbulence, and concerns over financial stability.In response, the authorities (i) accelerated the move to a floating exchange rate, raised policy rates and increased FX liquidity; (ii) introduced temporary regulatory forbearance and a capital support program; and (iii) provided some fiscal stimulus and limited wage indexation to support the disinflationary process.Russia is expected to be in recession in 2015 due to the sharp drop in oil prices and sanctions.GDP is expected to decline by 3.4 percent driven by a contraction in domestic demand weighed down by falling real wages, higher cost of capital, and weakened confidence.The external position will remain challenging due to deleveraging in the face of limited market access.Inflation is expected to come down due to the dissipating impact of the ruble depreciation, the limited wage indexation in the budget and the recession.Growth should resume in 2016 while inflation continues to decline.However, the recovery is unlikely to be strong as the limiting factors behind decelerating potential growth will take time to be addressed, leading to medium-term growth of 1.5 percent per year.An increase in geopolitical tensions is the main risk to the outlook.1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year.A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies.