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Russia's ex-finance boss warns of 'full-blown crisis' | Russia's ex-finance boss warns of 'full-blown crisis' |
(35 minutes later) | |
Russia's former finance minister has warned the country is entering a "full blown economic crisis" and will enter recession next year. | Russia's former finance minister has warned the country is entering a "full blown economic crisis" and will enter recession next year. |
"We are entering or have already entered a full-blown economic crisis, and we're going to feel it to the full next year,'' said Alexei Kudrin. | "We are entering or have already entered a full-blown economic crisis, and we're going to feel it to the full next year,'' said Alexei Kudrin. |
His warning came as Russia's central bank lent Trust Bank 30bn roubles (£339m) to stop it going bankrupt. | |
It marks Russia's first bank bailout since the rouble's sharp collapse. | It marks Russia's first bank bailout since the rouble's sharp collapse. |
The Russian currency has lost more than 45% of its value against the dollar since the start of the year, with falling oil prices and Western sanctions both weighing on the country. | The Russian currency has lost more than 45% of its value against the dollar since the start of the year, with falling oil prices and Western sanctions both weighing on the country. |
Despite the sharp fall, deputy prime minister Igor Shuvalov indicated the government would not intervene, saying it "opposes'' currency controls as a way to tackle the rouble crisis, and saw "more harm in them'' than potential advantages. | |
'Serious challenge' | 'Serious challenge' |
Russia's central bank has already tried unsuccessfully to stabilise the currency, buying roubles in the markets and raising its main lending rate to 10.5%. | Russia's central bank has already tried unsuccessfully to stabilise the currency, buying roubles in the markets and raising its main lending rate to 10.5%. |
But those efforts have been overwhelmed by the fall in the price of crude oil - one of the country's main exports - and by concerns that international sanctions over Ukraine might be stepped up. | But those efforts have been overwhelmed by the fall in the price of crude oil - one of the country's main exports - and by concerns that international sanctions over Ukraine might be stepped up. |
On Monday, Mr Kudrin said that even if the price of oil, currently trading at around $62 a barrel, rose to $80 a barrel the Russian economy would still contract by at least 2%. If oil remained at around its current level he said the economy would shrink by 4%. | |
"This is a serious challenge to the economy," he said. | "This is a serious challenge to the economy," he said. |
He calculated that low oil prices accounted for as little as a quarter of the rouble's decline, with western sanctions against Russia accounting for 40%. | |
The Russian government warned earlier this month that the country would fall into recession next year as western sanctions and falling oil prices began to bite. | The Russian government warned earlier this month that the country would fall into recession next year as western sanctions and falling oil prices began to bite. |
Its economic development ministry estimated the economy would contract by 0.8% next year, compared to its previous estimate of 1.2% growth. | Its economic development ministry estimated the economy would contract by 0.8% next year, compared to its previous estimate of 1.2% growth. |