- Economy contracted 3.8% in fourth quarter after drop of 3.7%
- Flexible ruble allowing Russia to endure collapse in oil price
Russia’s economy shrank less than forecast in the fourth quarter, using a flexible exchange rate to ride out the collapse in oil prices.
Gross domestic product fell 3.8 percent from a year earlier after a revised 3.7 percent drop in the previous three months, the Federal Statistics Service said Friday. The median estimate of 13 analysts surveyed by Bloomberg was for a 3.9 percent decline. Contractions in the first and second quarters of 2015 were revised to 2.8 percent and 4.5 percent from 2.2 percent and 4.6 percent, leaving the full-year decline unchanged at 3.7 percent.
There’s “evidence that the economy is going through a continuous adjustment to ‘the new normal’: the low oil price, a free-floating ruble and geopolitical uncertainty fed by sanctions,” Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said before the data release.
The rout on commodities markets, compounded by sanctions over Russia’s role in the Ukrainian crisis, has pushed the world’s biggest energy exporter into its first recession since 2009. Russia, which relies on crude and gas for about 40 percent of its budget revenue, has offset the shock of oil’s collapse by allowing the ruble to trade freely.
The ruble is up more than 8 percent against the dollar this year after a 20 percent loss in 2015. It traded 1.4 percent weaker at 67.9790 against the U.S. currency at 3:42 p.m. in Moscow.
The central bank has credited the weaker currency for making Russian products more competitive. Policy makers kept their benchmark interest rate at 11 percent for a fifth meeting last month, citing what they called a “less severe downturn” than previously estimated.
The decline in GDP “is gradually bottoming out,” Economy Minister Alexei Ulyukayev said March 24. The economy will return to annual growth between the second and third quarters of 2016, according to Ulyukayev.