Russian economy may shrink 4%, budget deficit 3% in 2015

Russian Finance Minister Anton Siluanov said on December 26 that the country's economy could shrink by 4% in 2015, with a budget deficit of 3%.

Speaking to the press, Mr. Anton Siluanov said that the Russian economy will decrease by 4% when oil prices are predicted to fluctuate around 60 USD/barrel and the ruble exchange rate is around 51 rubles/USD.

Russian Finance Minister Anton Siluanov. (Source: AFP)

The government will have to cut spending further or save foreign currency reserves, Mr. Siluanov said, saying the current planned 10% cut is not enough.

Recently, the Russian Central Bank also stated that with the current low oil price (below 60 USD/barrel), the country's economy could decrease by 4.8% in 2015 and is expected to recover by 2017.

Previously, the Russian government predicted that the economy would only shrink by 0.8% in 2015. However, due to the pressure of a sharp drop in world oil prices (more than 50% in 5 months) and the impact of economic sanctions from the US and Europe against Russia related to the Ukraine crisis, the Russian economy is sliding into recession with the ruble losing its value severely and inflation rising continuously.

Last week, Russia's currency spiraled out of control when it lost 10% of its value in just one day (December 16), forcing the Central Bank to raise interest rates from 10.5% to 17% while the government issued a decree requiring state-controlled export businesses to sell foreign currency to save the ruble.

Russian Prime Minister Dmitry Medvedev warned that Russia will face the risk of a deep recession if the government neglects its spending plans./.

According to VNA