Minister of Economic Development admits Russia has entered recession

Ulyukayev added that the ministry had not calculated the impact of U.S. and EU sanctions on Russia’s economy. “I think this is impossible to calculate, in principle. This is because there were no formal economic sanctions, and there is an expectation of sanctions, which, from my point of view, is even more dangerous for the economy, because it means that there will be a pause in investments, when no investment decisions will be made, and in some cases already taken decisions are being wound up,” he said. The forecast prepared by the ministry says that in the short and medium term, Russia has enough reserves to compensate for most of the losses caused by the sanctions, which in the long term may also undermine the state budget and reduce opportunities for modernization, due to restrictions on the import of technology, investments and best practices. A continuation of the Ukrainian crisis could lead to a worsening of borrowing conditions, a growth in risk premium and increased capital outflows, causing a weakening of the ruble, rising inflation and a reduction in consumer confidence. Ulyukayev admitted that the expectation of sanctions has already affected the investment climate in Russia. “Of course, the big role of this factor can be found in the fact that for the first quarter we have seen a negative trend in investments into fixed assets (minus 2.4 percent),” he said. The probability of a recession in the Russian economy in the first half has not been ruled out by the Ministry of Finance, which in early May predicted a decrease in GDP in two consecutive quarters. Confirmed by Western experts Earlier, in late April, experts from the International Monetary Fund (IMF) concluded that Russia’s economy has entered a recession. In a statement, the IMF noted that the fund had lowered its GDP growth forecast for the country in 2014 to 0.2 percent, down from 1.3 percent in the previous forecast, which was made in early April.