April 29 (Bloomberg) -- Russia’s economy will probably contract by at least 6.5 percent this year as the nation faces “a combination of shocks” amid declining capital inflows and sliding exports, Citigroup Inc. said.

The forecast replaces an earlier prediction for a 3 percent contraction, Elina Ribakova, Citigroup’s chief economist in Moscow, said in a research note e-mailed late yesterday. Should the government not move to swiftly recapitalize banks, gross domestic product growth is also likely to “stagnate” in 2010, she added.

Should oil prices not rise to a minimum $100 a barrel in 2009 and $87 in 2010, Russia’s budget probably won’t balance and devaluation pressures on the ruble are likely to return, Ribakova said. “Fiscal policy is constrained by the choice of a de-facto fixed exchange-rate regime.”

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

Last Updated: April 29, 2009 02:43 EDT