Russian economy contracts for first time since 2009

Russia’s economy had its first decline since October 2009 last month as manufacturing and investment shrank amid the rouble’s worst rout in a decade.

GDP shrank 0.5 per cent in November from a year earlier after a 0.5 per cent increase in October, the Economy Ministry in Moscow said in a report. Seasonally adjusted GDP fell 0.2 per cent in the month after a 0.1 per cent advance in October.

The economy of the world’s biggest energy exporter is facing its first recession since 2009 next year as oil, trading near a five-year low, and sanctions imposed over Ukraine pushed Russia into its biggest currency crisis since 1998. With oil prices at $60 a barrel, the economy may contract about 4 per cent next year, according to Finance Minister Anton Siluanov.

“A sharp slowdown in manufacturing had the main negative effect on GDP dynamics in November,” the ministry said in the statement.

Negative trends continued in construction, wholesale trade and agriculture.

The Russia Manufacturing Purchasing Manager’s Index fell to 48.9 in December, the lowest since May, from 51.7 in November, according to a report released today by HSBC Holdings and Markit Economics.

The median estimate of three economists surveyed by Bloomberg was for a decline to 49.5. A reading below 50 signals contraction.

“The consumer goods producers stopped benefiting from the retail sales growth,” Alexander Morozov, HSBC’s chief economist for Russia, the Commonwealth of Independent States and the Baltics, said in the report. “This suggests that the import substitution in this sector further to the ruble depreciation may be problematic and will take time, at best.”

The rouble, the second-worst performer this year among more than 170 currencies tracked by Bloomberg after Ukraine’s hryvnia, has lost almost 41 per cent against the dollar. Russian currency weakened 2.8 per cent to 55.5630 as of 12.03pm.

Follow The National's Business section on Twitter