The Central Bank downgraded the assessment of the decline in GDP in the first quarter of 2016

The Bank of Russia has lowered its estimate of the annual rate of decline of Russia’s GDP in January—March 2016, citing negative foreign economic conjuncture and the threat of weakening economic activity.

“The observed deterioration of foreign economic conjuncture in the beginning of the year increases the risks of weakening economic activity. According to Bank of Russia estimates, the annual rate of decline of GDP in the first quarter of 2016 could reach 1.7 to 2.5%, which is higher than the previous forecast (1-2%)”, — stated in the materials of the Central Bank.

The document stresses that after excluding the seasonal factor, the GDP in the first quarter of this year will decline compared with the previous quarter by less than 1%.

In the same report published on the website of the Central Bank, noted that the situation in the economy in December 2015 remained difficult. In particular, consumer demand continued to decline amid falling real incomes of Russians and growth of unemployment, which, as experts expect the Central Bank will continue to grow and in early 2016.

“In the beginning of 2016 the unemployment rate will increase amid a further slowdown in economic activity. In the face of shrinking wages and rising unemployment the final consumption expenditure of households in the first quarter of 2016 may decrease by 2.2–3.3% compared with the corresponding period of the previous year”, — stated in the forecast of the Central Bank.

Among negative factors experts of Bank of Russia include increasing and falling of investments into fixed capital. In December 2015, he has accelerated yoy to 8.7% (in November it was 4.9 per cent).

“Volatility in the dynamics of investments in fixed capital related to the high level of economic uncertainty pointed to by the indexes of business confidence. Financial conditions for the recovery of investment activity also has emerged: monetary conditions remain relatively tight, and the financial situation of the companies of the real sector is unstable. Considering these factors is expected to continue declining investment in fixed assets in the first quarter of 2016”, — emphasized in the forecast of the Central Bank.

On the eve of the international rating Agency Fitch has worsened the forecast for the development of Russia’s economy in 2016. If earlier the experts of Fitch expected that by the end of the year Russia’s GDP will grow by 0.5%, now they are waiting for its decline of 1%.

Earlier it was reported that by the end of the last quarter of 2015 index of economic sentiment (IAN), estimated by the market research Center of the Higher school of Economics, dropped to a level 83.7 points — the lowest level in six years. The index value of 100 corresponds to the normal sentiment in the business environment, significantly below 100 — “depressive crisis”.

Earlier, the former Minister of Finance of Russia Alexey Kudrin has warned that the peak of the economic crisis has not yet passed, and 2016 Russia brings “new risks”.

Kudrin also said that Russia may face with a new decrease in GDP if the price of oil drops back below $35.

“Anything below $40, already hard enough for us. If you are below $35, we can have a new fall in GDP for some period”, — told ex-the Minister of Finance.

During today’s trading on the stock exchange ICE cost of a barrel of Brent fluctuating between $32 and 34.