Russian economy contracts 4.6 per cent in second quarter

 
Emma Haslett
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Russia's dependence on oil meant its economy declined 4.6 per cent (Source: Getty)

Another bad day for the Russian economy, after figures published today showed it contracted 4.6 per cent in the second quarter compared with a year earlier, missing even analysts' pessimistic expectations of a 4.5 per cent contraction.

Although the contraction was larger than feared, the fact GDP fell hardly came as a surprise: with the country's economy heavily dependent on oil, the oil rout has had a damaging effect, just as Western sanctions began to take their toll. In the first quarter, the economy contracted by 2.2 per cent.

Today Russian oil giant Gazprom reported second quarter net profit of 382bn roubles (£3.8bn) - which, when denominated in local currency, was a sharp increase, but when denominated in dollars, was a fall. Sales to Europe, one of its most important customers, fell 16 per cent.

The fall in commodity prices has caused the rouble to slip to 63.7 against the dollar, from as low as 35.9 this time last year.

At the end of last month the Russian central bank cut interest rates by half a percentage point, to 11 per cent, as it sought to stem the effect of falling oil prices.

However, that hasn't prevented Vladimir Putin taking bizarre measures against Western companies. Last week the country put foreign-made condoms on a list of new additions to its sanctions list - before steamrollering nine tonnes of Western-made cheese.

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