Russia’s slump deepened in the second quarter, with the government expressing confidence that the economy remains on track to pull out of recession.
Gross domestic product probably shrank 4.4 percent from a year earlier, Economy Minister Alexey Ulyukayev told reporters on Monday in Brest, Belarus, citing his ministry’s preliminary estimates. GDP fell 2.2 percent in the first quarter, the first drop since 2009.
“That’s probably the lowest point,” he said after meeting with his Belarusian counterpart Vladimir Zinovsky. “Then, from the third quarter, there will be some adjustment.”
The world’s largest energy exporter is closer to turning the corner after succumbing to a recession amid a slump in oil prices and U.S. and European sanctions over Russia’s support for rebels in Ukraine. Last year’s ruble collapse, the worst since 1998, spurred inflation to the fastest in 13 years and devastated consumer demand, a mainstay of Russia’s economic recovery since the 2008-2009 crisis.
“We’re are concerned with the situation in investment, activity in construction,” Ulyukayev said. “But if we look at the broader economy, we see consumer demand is better, food production shows positive dynamics.”
The ruble fell to a four-month low as Brent crude extended losses, weakening 1.8 percent to 59.4830 against the dollar as of 6:19 p.m. in Moscow. Yields on five-year government bonds increased 15 basis points to 11.05 percent.
The Finance Ministry shares Ulyukayev’s assessment of economic performance, Deputy Finance Minister Maxim Oreshkin said by phone. GDP will drop 3.5 percent in the fourth quarter after shrinking 4 percent in each of the prior three-month periods, according to the median forecast of analysts surveyed by Bloomberg.
Fixed-capital investment extended its slump to 18 months with a 7.1 percent decline in June. Retail sales have been contracting since the start of the year as real wages shrink the most since President Vladimir Putin was first elected president 15 years ago.
The economy slumped 3.4 percent in the first half of the year and will probably shrink 2.6 percent to 2.8 percent this year, in line with government forecasts, according to Ulyukayev. GDP will grow more than 2 percent next year, he said.
“In 2016, we’ll enter a trend of low, though rather stable, economic growth,” Ulyukayev said. “Pointing to that are the positive trend in inflation, an improving situation with real disposable incomes and consumer demand.”
The Economy Ministry is more upbeat than the central bank, which forecast a 3.2 percent contraction this year and doesn’t rule out a second year of recession if the blend of Russian crude averages $60 a barrel.