The International Monetary Fund on Thursday announced a less pessimistic forecast for Russia's economy, predicting no more than 3.4 percent contraction in 2015 and emergence from recession in 2016.

The IMF had last month predicted that the economy would contract by 3.8 percent this year and by 1.1 percent in 2016.

"A recession is expected in 2015 followed by a mild recovery in 2016," the IMF said in a statement released at a presentation in Moscow.

"GDP is expected to decline by 3.4 percent in 2015 driven by a contraction in domestic demand and weighed down by falling real wages, higher cost of capital and weakened confidence."

The Russian authorities' "anti-crisis package has helped to stabilise the situation," said Ernesto Ramirez Rigo, the head of the IMF's mission in Russia.

He said Russia's economy still faces "significant risks mainly caused by oil prices... and of course the geopolitical tensions but at the same time they are mitigated by large buffers."

"There will be a mild recovery in 2016," he said, adding that "the medium term outlook is for low growth."

Russia is currently suffering from the effects of a major currency crisis in 2014 triggered by Western sanctions over the Ukraine conflict as well as the effect of plunging oil prices on its economy dependent on energy exports.

Russians' spending power and consumption collapsed amid spiralling inflation which forced the Russian authorities to spend some of their reserves on propping up the financial sector and to cut spending.

The new IMF prediction for 2015 is still more pessimistic than that of the Russian government which is forecasting a contraction of 2.8 percent.

Finance Minister Anton Siluanov, after meeting the IMF's mission members on Thursday, even suggested the contraction could be no more than 2.5 percent.

He was cited as saying on Twitter Thursday that the "situation in the financial sphere is seeing a trend towards stabilisation."
Source: AFP