Russia: Economy Recesses, Ruble Falls Additional 6%

The Russian economy retracted for the first time since 2009, registering a fall of 0.9% in November. The lack of growth exacerbated the ongoing crisis surrounding the ruble, reducing the currency’s value by an additional 7%. Emergency stimulus injected into the currency by the Russian central bank seemingly stopped the currency free fall in weeks past, though as figures related the Russian economic situation continue to emerge, the currency’s value is expected to continue to fall.

The Russian economy is projected to recess by nearly 1% in 2015, and although a modicum of growth is forecast for 2016, questions concerning Russia’s ability to save its economy have put even the most hopeful estimates in doubt. Sanctions regimes imposed by the United States and the European Union will continue to have an impact on the economy as long as relations between the two sides are soured. The fall in oil prices has also played a role in provoking the downward economic spiral felt in Russia, with prices still at lows not seen since 2009. The ruble’s value vis-à-vis the dollar is currently 57:1, less than half of the ruble’s value at the start of 2014.

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News Briefs:

  • The Ukraine parliament passed a budget for 2015, bringing to a close a period of speculation over whether or not Kiev would be able to secure much-needed relief funds from the International Monetary Fund. Prior to the budget’s passing, the Ukrainian parliament approved related austerity laws, including additional duties on foreign imports. While believed to be unpopular with Western trade partners, the measures are expected to assist Kiev with debt repayment and rebuilding its foreign currency reserves, which stand at only 50% of where they were at the beginning of 2014.
  • Russia’s defense ministry released new documentation labeling NATO as its main military threat. The perceived expansion of NATO into Russia’s historical sphere of influence, as well as the construction of missile defense systems in Central Europe feature prominently in the document, released earlier this week. The fact that NATO figures as Russia’s main military threat is not a new one, though the report highlights the growing concern posed by a NATO that seeks to “improve the offensive capabilities” of nations bordering Russia.
  • Tajik President Emomali Rahmon has increased the urgency of anti-Islamic State (IS) rhetoric in the past several months. The most recent statement released by the Tajik strongman labels the group as a “plague,” and coincides with the end of the US-led war in Afghanistan. Uncertainty and concern have increased in Central Asia as regional leaders fear a security vacuum could lead to a resurgence of Islamic extremist groups in Afghanistan, and spillover into bordering nations.
  • Turkmen authorities announced the pending construction of a large cement plant in the country’s Koytendag region. The plan for further development forms part of the Turkmen government’s “Program for Development of Construction and Industrial Sectors in 2015” policy. The development policy seeks to diversify its raw materials sector and increase regional competitiveness.
  • Inflation in Tajikistan rose by 0.4% in 2014, leaving the national inflation rate at 6.8%. Rise in inflation notwithstanding, the Tajik inflation rate still features as the lowest amongst all Central Asian nations.
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