According to figures from the Russian government, the economy contracted 4.6 percent in Q2 due to lower oil prices, according to the Associated Press. The economy has also been damaged by western sanctions over the Ukrainian conflict, but a low-priced oil market is the main driver behind lagging output in Russia.
In response to the Chinese and Greek crises, the Russian government is keeping a tighter lid on its currency, according to Bloomberg. The Bank of Russia purchased $200 million in daily reserves to increase the total amount to $500 billion, which may take anywhere from five to seven years, and Russia has only purchased $7.4 billion thus far. Finance Minister Anton Siluanov stated that Russia is prepared to prevent any volatility in the nation’s exchange rate.
The Central Bank of Russia slashed its crucial interest rate to 11.5 percent on Monday in order to stimulate economic growth. The move is not a repeat of previous drastic basis cuts, but some experts were on the mark when they believed the bank would reduce the rate by a full percentage. Russia cut rates in May from 14 to 12.5 percent, and economists expect the bank to continue cuts but on a less severe basis.
Since the escalating tensions around Ukraine, Russia has seen inflation rates soar and economic growth collapse, but Russia’s central bank sees an end to the troubles for the eastern nation.
Russia’s economy contracted 1.9 percent in Q1, marking the first economic shrinkage since 2009, but analysts expected a slowdown of 2.6 percent. April’s manufacturing report showed better results than expected, with lower input inflation and higher output.
Russia’s central bank cut a crucial interest rate by 1.5 percentage points, bringing the rate down to 12.5 percent. The cut marks the third adjustment for 2015, and the bank will keep cutting rates as consumer prices lower, among other factors.
Consumer confidence fell to -32.3 in the first quarter of 2014, a 14-point drop. Many Russians feel the sting of inflation, a weakened ruble and sanctions.
Russia is looking to establish a stronger business relationship with the United Arab Emirates in order to get an economic boost. Russian President Vladimir Putin seeks to save his economy from sanctions imposed by western powers. Russians are also looking to the rest of the Gulf region as a lucrative investment source.
Quarter of a century on from the heady days of perestroika and the Russia Federation still presents an intriguing and tough-to-navigate world for businesses. The collapse of the command economy and the gradual opening up of large and potentially fruitful markets has led to a steady influx of foreign firms keen to operate in the post-Soviet world. Examining the political environment for business in a Russia dominated by its president, Vladimir Putin, will explain the peculiarities of the business environment they face.
Facing trouble on its western borders, Russia is pinning its hopes on the East. Moscow has initiated its own Asian pivot, making efforts to cultivate political allies and economic partners in Asia.
