Russia Warns It May Enter Recession As Soon As This Quarter
While hardly coming as a surprise to anyone, Russia is getting increasingly more vocal about the near certainty that the country is about to slam headfirst into a technical (at first), and then outright recession.
Bloomberg reports that Russia’s economy may halt or contract in 2Q or 3Q, citing Maxim Oreshkin, head of Finance Ministry’s strategic forecasting dept.
"It seems that we’ll get negative growth again in the second quarter compared with the previous quarter." Oreshkin says
He added that capital outflows may reach $70b-$80b in 2014, while inflation spikes to 7.2%-7.3% y/y in April, and then peak in May or June at 7.5%. However, that will be it and promptly after inflation will slow by year-end to range of 5%-6%
Still, Russia's Current-account surplus may exceed $50b in 2014, thanks mostly to net exports offseting the capital outflow. Russia may use National Wellbeing Fund for Crimea infrastructure.
All of this was expected. The only question is how much the Russian recession, which will impact various local companies across the global trade chain, will impact the economy in nearby China and Japan, but mostly Europe. Then again, if there is one person who is praying daily that the Russian economy slams Europe is none other than Draghi, who would use this "external" shock to the "strong" European economy as precisely the wildcard justification needed to launch European QE, instead of bond monetization by the ECB being perceived as the testament to the ECB's failure to spark inflation in Europe on its own for three years.
After all, it is always easier to blame someone for any unpopular actions you would have done anyway. In this case, Europe may actually just succeed.
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