Russian economy shrinks most since 2009 as oil prices sink

[MOSCOW] Russia's economy contracted the most since 2009 last year as the price of oil, a key export, sank and sanctions over the conflict in Ukraine curbed access to international financing.

Gross domestic product fell 3.7 per cent after growth of 0.6 per cent in 2014, the Federal Statistics Service said Monday on its website, citing preliminary estimates. Economists in a Bloomberg survey forecast a 3.8 per cent drop.

"The economy's going through big adjustments - it's still addicted to oil," Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said by e-mail. "The weak ruble and import substitution will continue to support local production, although on a moderate path. It's a long and painful journey to recovery." The economy of the world's largest energy exporter is facing a second year of contraction after a renewed slump in crude prices at the start of 2016 sent the ruble tumbling to a record. Monetary-policy makers, meeting Friday to discuss interest rates, have limited room to trim borrowing costs with inflation at more than three times their medium-term target. The central bank has held its benchmark rate at 11 per cent for the past three meetings.

The ruble has lost more than 20 per cent against the dollar in the past three months, the second-worst performer among 24 emerging-market currencies tracked by Bloomberg, behind Argentina's peso. While slowing in December, inflation was still 12.9 per cent, further choking consumers' spending power.

BLOOMBERG