IMF cuts Russia growth outlook for 2014

The International Monetary Fund (IMF) has cut its 2014 growth forecast for Russia, saying the country is in recession because of damage caused by the Ukraine crisis.

Antonio Spilimbergo, the head of the IMF mission in Russia, said Wednesday that the fund has cut Russia’s growth forecast for this year to 0.2 percent from an initial 1.3 percent.

According to the IMF, the sanctions imposed on Moscow for its stance on Ukraine, have been damaging the country’s economy and threatening investment there.

“The difficult situation and especially the uncertainty surrounding the geopolitical situation and follow-up of sanctions and escalation of sanctions are weighing very negatively on the investment climate,” said Spilimbergo, adding, “If we define recession as negative growth in two quarters in a row, then Russia from that point of view is experiencing recession.”

Russia’s economy contracted by about 0.5 percent in the first three months of this year compared with the previous quarter and Spilimbergo’s comments indicated that he expected further contraction in the three months up to June.

The IMF mission chief also said Russia’s economy has seen a capital flight since the start of the Ukraine crisis and that it will experience capital outflows worth 100 billion dollars this year.

Russia’s central bank has already confirmed that nearly 64 billion dollars left the country in the first quarter of this year.

This comes as the European Union (EU) decided on Tuesday to add 15 more Russian and pro-Russian figures to its sanctions list over the current crisis in Ukraine.

The EU’s bans coincided with a White House announcement that the United States was imposing its third round of sanctions, targeting seven senior Russian officials and 17 companies linked to President Vladimir Putin’s “inner circle.”

Tensions between Western powers and Moscow heightened after Crimea declared independence from Ukraine and became part of Russia following a referendum on March 16, in which almost 97 percent of the participants voted for joining the Russian Federation, with a turnout of over 83 percent.