In surprise, Russian economy expanded in 4th quarter

A recession is expected for 2015.
By Ed Adamczyk  |  April 1, 2015 at 11:05 AM
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MOSCOW, April 1 (UPI) -- The Russian economy expanded 0.4 percent in 2014's fourth quarter, a surprise increase before the country's currency crisis took hold.

Gross domestic product increased during the year's last quarter, resulting in a full-year growth of 0.6 percent, the Moscow's Federal Statistics Bureau reported Wednesday, citing preliminary figures. The numbers do not reflect the growing impact of the two factors currently slowing the Russian economy: a decline, by nearly 50 percent, in the global price of Russia's largest export, oil, and the decline in the value of the ruble. Each has brought Russia to the edge of recession, which will likely be reflected in future statistics.

Economic sanctions, applied by Western countries in retaliation to Russian involvement in Ukraine, have led to loss of markets and outflows of capital. The Russian government responded with a reduction in spending and an emergency increase in its interest rates.

While a recession is expected by the World Bank, former Russian Finance Minister Alexei Kudrin predicted a lengthy period of recovery.

"We will emerge from the crisis into economic stagnation," Kudrin said Tuesday in Moscow at a forum discussing President Vladimir Putin's 15 years as Russian leader. "Structural reforms were not done in time. This is the most serious challenge facing the president, a stagnating economy at least for the next five years. From 2012 to 2018 economic growth will be 1.5 percent [annually], in the best case two percent," he said in a rare rebuke of Putin's policies.

Kudrin, finance minister from 2000 to 2011, declared Russia "stuck," noting Putin could use his high approval rating within Russia to promote promised reforms, but has not done so.

"Global leaders' high ratings are a basis for trust and to conduct reforms. If this rating is not used to push through reforms it will be just a rating for the sake of a rating," Kudrin added.

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