Russia: Economy inches back from the brink

Interest rate cuts, rallying oil prices and an easing of tensions with neighboring Ukraine: Russia couldn’t ask for a better combination perhaps to bring it back from the brink of economic crisis. Oil prices were trading at 2015 peaks on Wednesday, while the Russian ruble has soared almost 14 percent against the U.S. dollar so far this year to about 50, making it one of the best-performing global currencies.

Close to 60 percent of Russia’s budget is dependent on oil or oil-related income, so not surprisingly, both of these moves are going together.

Joseph Dayan, head of markets at BCS Financial

Russian Prime Minister Dmitry Medvedev said last month the Russian economy shrank by 2 percent in the first three months of this year, the first contraction since 2009. Russia was also benefiting from the fact that fighting in Ukraine has ebbed in the past few months (however Wednesday was the deadliest day since last month). Moscow has been under Western sanctions since annexing Ukraine’s Crimea region in March 2014. It’s those sanctions, together with a rout in oil prices in the second half of last year that helped spark a currency crisis, as the ruble fell sharply to a record low against the dollar at the end of last year.

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