Business World

Monday 15 September 2014

Russian recession risk at record high as further sanctions loom

Andre Tartar and Anna Andrianova

Published 29/08/2014 | 02:30

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Vladimir Putin

The chance of Russia's economy tipping into a recession is rising as the escalating crisis in Ukraine raises the risk of the government in Moscow retaliating with further import bans, according to a survey of analysts.

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The probability of a recession in the next 12 months rose to 65pc from 50pc, the highest since the first such Bloomberg survey in June 2012.

This is according to the average estimate of 26 economists polled.

Russia will enact additional restrictions in retribution for sanctions imposed by the US and the European Union, according to 15 of 25 economists.

Of those, 12 expect Russia to target cars and consumer goods.

The standoff with Western countries over Ukraine is capsizing Russia's $2 trillion economy.

The rouble weakened, inflation accelerated and capital flight quickened as the two sides exchanged salvos of sanctions.

After the US and the EU blacklisted some Russian individuals and businesses, President Vladimir Putin, pictured, this month banned imports of some food products.

"After the last round of sanctions and somewhat unexpectedly harsh Russian retaliation, which is going to hurt it more than the Western countries, it is becoming obvious that economic reasoning was not found in Russian policy makers' toolkit," said Nerijus Maciulis, chief economist at Swedbank Lithuania.

Russian sovereign bonds have declined 11.23pc since the beginning of the year, compared with a 6.23pc advance for comparable bonds.

The rouble has lost more than 10pc against the dollar this year.

Ukraine and its allies blame Russia for aiding the separatist insurgency with manpower and weapons.

The government in Moscow says it isn't involved in its neighbour's unrest in which more than 2,000 people are estimated by the United Nations to have been killed.

Mr Putin, after a meeting with Ukrainian President Petro Poroshenko, said last week he "will do everything for this peace process".

Even so, Mr Poroshenko yesterday called an emergency security meeting to defend against what he called a "de facto" Russian incursion.

Irish Independent

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