Russia will plunge into recession next year under the weight of lower oil prices and western sanctions over Ukraine, the economy ministry warned.
Gross domestic product is expected to shrink by 0.8%, a sharp reversal from the earlier official forecast of 1.2% growth for the year.
Alexei Vedev, the Russian deputy economy minister, said: “We now assume that sanctions will remain in place throughout the whole of 2015. This for us means closed capital markets for the majority of Russian companies and banks, as well as unfavourable conditions for investment – uncertainty and a lack of security.”
The ministry, which had previously assumed sanctions would be lifted next year, also cut its forecast for the 2015 oil price to an average $80 a barrel, down from $100 a barrel, cutting revenues from Russia’s main exports of oil and gas.
It is also expecting capital flight from Russia to continue amid heightened uncertainty. The ministry increased its forecast for 2014 net capital outflows to $125bn from $100bn, and to $90bn in 2015 from $50bn.”Uncertainty and lack of economic confidence caused by harsher geopolitics have led to a prediction of higher capital flight and lower investment,” the ministry said in a report briefly posted on its website before it was removed.