Russia: Recession-hit economy shrank 4.3% in third quarter

Russia's economy shrank 4.3 percent in the third quarter this year, the government said Monday, as a recession caused by low oil prices and Western sanctions over Ukraine continued to take its toll.

Deputy economy minister Alexei Vedev told Russian news agencies that preliminary estimates put the year-on-year drop in gross domestic product for the third quarter at 4.3 percent, slowing to 3.8 percent in September from 4.6 percent in August.

Officials in Russia are struggling to breathe life into the economy as the ruble has dropped precipitously in value and inflation and poverty have risen sharply.

Overall, the economy dropped 3.8 percent for the first nine months of the year, Vedev said.

Russia's government estimates that the economy will shrink by some 3.9 percent in 2015 before recovering slightly by 0.7 percent in 2016.

The World Bank last month predicted the Russian economy would shrink by 3.8 percent in 2015 in its baseline scenario, a far steeper drop than an earlier forecast of a 2.7-percent contraction.

The downturn in 2015 could be as much as 4.3 percent if oil prices continue to drop and average around $50 dollars a barrel for the year, the bank said.

The bank ditched its earlier forecast of a gentle recovery with 0.7 percent growth in 2016. It now expects Russian economic output to decline 0.6 percent next year, with a recovery only appearing in 2017 with growth of 1.5 percent.

The poverty rate has climbed to 15.1 percent, representing 21.7 million people, in what the World Bank called a "troubling rise" exacerbated by increasing food prices.

In some regions, more than 35 percent of the population live in poverty, it said.

The International Monetary Fund estimates that Western sanctions imposed on Moscow over its meddling in Ukraine could cost Russia some 9 percent of GDP in the medium-term.

Ratings agency S&P said last week that the outlook for Russia's recession-hit economy remains weak, predicting it would only expand by about 0.4 percent annually between 2015 and 2018.