The Russian economy has contracted for the first time in five years after falling oil prices and sanctions imposed by western governments began to take their toll.
Oil prices have fallen after the oil producing cartel Opec refused to cut production to shore up the price, which has slipped below $60 a barrel from its recent high of $115. Oil and gas account for 70% of Russia’s exports and Moscow needs an oil price in the region of $100 a barrel to balance its budget.
This dependency on oil has led to a rout of the rouble on the foreign exchange markets, prompting an emergency rise in interest rates to 17% from 12.5% earlier this month. As a result, the currency has recouped some of the ground lost against the dollar - where it was trading at historic lows earlier this month
The prospects for the country’s economy are expected to remain weak after President Vladimir Putin’s government revealed that GDP in November was 0.5% lower than in the same month a year ago.
It is the first time since October 2009 that the Russian economy has shrunk and comes at a time when the rouble has been collapsing on foreign exchange markets after a near halving of the oil price since June 2014
Manufacturing, construction, agriculture and service sectors all contracted in November, although energy, mining and the retail trade showed continued growth
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