The latest fall in oil prices and in the ruble since the start of the year has dealt a blow to hopes that Russia’s economy would stabilise in the near future. Fiscal policy is likely to be tightened to counter the hit to the public finances. And the further bout of currency weakness means that inflation will take longer to fall back, prolonging the squeeze on consumers. To compound matters, recently-released data showed that the economy was still extremely weak towards the end of last year. GDP probably fell by around 3.5% y/y in Q4, and retail sales plunged at their fastest pace in December in at least 15 years. The upshot is that a second consecutive year of recession is looking increasingly likely.
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