Russia’s economy to contract 0.7% in 2015: World Bank

The World Bank on Tuesday predicted that Russia’s economy would shrink by 0.7 percent in 2015, but warned that the contraction would be worse if oil prices were to keep sliding.

The World Bank said its forecast is based on the “most likely” scenario of crude prices averaging at $78 in 2015.

But if oil prices fell to $70, Russia’s output would shrink by 1.5 percent, it said.

“In the baseline scenario, investment is projected to contract for a third year in a row in 2015 because of continued uncertainty, restricted access to international financial markets by Russian companies and banks, and lower consumer demand,” Birgit Hansl, the World Bank’s lead economist for Russia, was quoted as saying.

Consumption growth is expected to decline in 2015 for the first time since 2009 after “negligible expansion in 2014,” Hansl said.

The World Bank said that Russia would avoid recession in 2015 in a best case scenario if oil prices averaged $85.

On Tuesday, oil prices fell to fresh five-year lows, at around $65, battered by OPEC’s decision last month to maintain its output levels despite a global supply glut.

Russia’s economy has slowed in recent years, after GDP averaged eight percent during Vladimir Putin’s first two terms in office from 2000 to 2008. In 2013, growth was just 1.3 percent, attributed by economists to over-reliance on oil and gas revenues.

This year, falling growth has been exacerbated by the impact of Western sanctions on Russia over Ukraine and falling oil prices.

The ruble has fallen around 40 percent against the dollar and 32 percent against the euro since the beginning of the year, prompting price rises and people to switch to savings in other currencies and to reduce spending.