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Russian Finance Ministry: Economy to come in recession in Q2

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Russian Finance Ministry: Economy to come in recession in Q2

Outflow of capital from the country is to continue, and price rise is to speed up.

According to the results of Q2, the Russian economy is to fall in recession, the Finance Ministry believes. In Q1 negative dynamics of the GDP as compared to Q4 in 2013 was noticed, the Ministry of Economic development informed earlier. In Q2 the economy will go into the red as well. It had been stated by the director of strategic planning department Maxim Oreshkin, RBK informs.

“The Ministry of Economic development has evaluated Q1 as compared to Q4 to be equal to -0.5% (the GDP dynamics) (seasonally corrected). It seems that we will be in the red in Q2 again,” he said.

An economy is officially recognized in the state of recession when the GDP loss is taking place two quarters in the row. “A quarter is compared to a quarter without seasonal fluctuation,” Oreshkin noted. Thus, the Finance Ministry does not exclude technical recession as of year-end, he said.

The GDP growth can soon fall below zero in yearly comparison, Oreshkin said. “0.8% (growth as compared to the corresponding period of the last year) in Q1 means that it would be worse in the future. We expect Q2 and Q3 to be much worse than 0.8%, closer to zero point, and we do not exclude we can see a negative value,” he said.

A flabby growth of the economy would affect inflation as well, he continued. As said by him, in the nearest months, the price rise in its yearly rate is to speed up sharply.

“We expect 7.2-7.3%. The maximum this year will be reached in May-June, about 7.5% as we expect, and then an abrupt fall starting from July,” the official said. By the end of the year the Finance Ministy expects inflation to lower to 5-6% and enter a corridor predicted officially today. “It will be less than 6% by the end of the year,” Oreshkin specified.

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