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Russian economy contracts, first sign of recession

Legislation to double guarantees on bank account deposits was signed Monday.

By Ed Adamczyk
Russian economy contracts, first sign of recession
A Russian ruble. Photo by Valeri Potapova/Shutterstock

MOSCOW, Dec. 29 (UPI) -- The Russian economy shrank in November by 0.5 percent, government figures indicated, the first official sign of a pending recession.

The decrease in gross domestic product came after a 0.5 percent increase in October, an Economy Ministry report said Monday. Russia, heavily dependent on the export of oil and suffering Western sanctions because of military involvement in Crimea and Ukraine, is expecting an overall decline in its economy of about four percent in 2015.

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Russia's manufacturing, construction, agricultural and servicer sectors each contracted in November, the report said.

"GDP dynamics will probably worsen later on, feeding the already pessimistic expectations over the prospects of the Russian currency," Dmitry Polevoy, economist at ING Groep NV in Moscow, told Bloomberg News. "A positive contribution of net exports can't make up for a contraction of domestic demand and a deeper fall in investment."

The value of the ruble fell to about 57 to the dollar Monday, a six percent loss after improvements last week. It has lost about half its value in the past year.

Monday President Vladimir Putin signed legislation doubling a government guarantee of individual bank deposits, to 1.4 million rubles ($25,370). In Russia's most recent recession, in 1998, many citizens' savings accounts were wiped out.

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