IMF: Russian economy already in recession

The International Monetary Fund estimates that Russia's economy has already entered recession as fears of broad economic sanctions weigh on the economy.

Russia's economy shrank 0.5 per cent in the first quarter of the year compared with the previous three-month period and is expected to continue struggling, said the head of the IMF mission in Russia, Antonio Spilimbergo.

"If you understand by recession two quarters of negative economic growth, then Russia is experiencing recession now," Spilimbergo told reporters.

Investors are worried that the United States and Europe will step up sanctions against Russia because of its policies in Ukraine. Russia annexed Ukraine's Crimean Peninsula last month and has been blamed for fomenting unrest in the country's Russian-speaking east.

As a result, investors pulled about US$60 billion from Russia in the first quarter of the year — more than in all of 2013. The IMF expects the capital outflows at around US$100 billion this year, Spilimbergo said.

While analysts keep cutting Russia's growth forecasts, the Kremlin denies it faces recession, insisting that the economy will pick up in the second quarter.

Last week, S&P quoted tensions in Ukraine and cut Russia's sovereign rating in the first rating downgrade in six years.

Russia's economy was already weakening last year, before the crisis in Ukraine blew up. It grew 1.3 per cent then, its worst performance in the past 13 years with the exception of 2009, when the country suffered in the global downturn.

- AP