IMF notes signs of Russia's economic stabilization

ANKARA

There are tentative signs of economic stabilization in Russia, the International Monetary Fund said in a report released late on Monday.

"The Russian economy is expected to contract by 3.8 percent in 2015, followed by a milder contraction of 0.6 percent in 2016, due to the headwinds from lower oil prices," the report said.

Russian trade is improving despite low oil prices, according to the report.

"The current account adjustment is progressing rapidly, supporting the ongoing external deleveraging process," the report said.

The IMF predicts that inflation will decline to 12.7 percent at the end of 2015, and, in the absence of shocks to international oil prices, to continue to fall further during 2016.

Currently inflation in Russia is at an annual 15.7 percent.

“Monetary policy has been appropriately on hold, but normalization can resume once underlying inflation and inflation expectations are firmly on a declining path. The pace of easing should be balanced against external risks and the need to build credibility under the newly introduced inflation targeting regime," the report said.

But the IMF is concerned about restoring fiscal stability in the country.

"Fiscal consolidation measures will require reforms to the pension system, tax expenditures, and subsidies. The fiscal adjustment should protect needed public investment, other productive spending and the social safety net," the report said.