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No new year cheer for Russia’s economy

Monday, December 29, 2014 - 01:42

Russia's economy contracted sharply in November, for the first time since October 2009. As Joel Flynn reports it's the biggest sign to date of the impact Western sanctions and a slump in oil prices are having on the slowing economy.

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If this taxi looks more like a tank, that's probably because it is. Alexei Evenkov has turned this Airborne Combat Vehicle into a money machine - now carrying citizens, not soldiers, around St Petersburg. It's a gimmick, but one he hopes will attract returns - especially from tourists. Few in Russia will feel so protected. The rouble has continued its slide down in value. And now it's seen a 0.5 percent fall in GDP for November - its first contraction since October 2009. IG's Chris Beauchamp. SOUNDBITE: IG Senior Market Analyst, Chris Beauchamp, saying (English): "I think if you factor in the oil price fall, the impact of sanctions and everything else that goes with that and the political uncertainty that you have building in Russia at the moment then the outlook is even worse than many people would fear." A bleak backdrop for the festive holidays and for shoppers. Oil prices are also down almost 50 percent since June. That's as well as Western sanctions imposed over Moscow's role in Ukraine. Those have deterred foreign investment, and led to over 100 billion dollars flooding out of Russia's economy this year. Questions are now about how long President Vladimir Putin can ignore these problems. SOUNDBITE: IG Senior Market Analyst, Chris Beauchamp, saying (English): "It will make life increasingly difficult for Russia and for its president. And the issue is can it pull itself out of this downward spiral anytime soon? I suspect the answer to that is a firm no; you will see the situation getting a lot worse before it gets a lot better." There's some faith here in Krasnoyarsk that Soviet-era styled Christmas decorations will prove popular. But with the falling rouble expected to lead to higher inflation next year, many will hope it's just the decorations that remind them of times gone by.

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No new year cheer for Russia’s economy

Monday, December 29, 2014 - 01:42