Russia’s largest bank warns of recession risk

Moscow, March 25: Risk of recession in the Russian economy exists, but it is too early to make precise forecasts due to high uncertainty of macroeconomic situation, head of Russia’s largest bank said Monday, the media reported.

Recession or flat growth of the gross domestic product (GDP) will occur if capital outflow amounts to $100 billion this year, Xinhua quoted German Gref, CEO of the state-owned Sberbank, as saying.

“So far, everything is okay. Everything is rather stable,” Gref said.

As for that Russians have converted their deposits from rubles into $70 million amid festering tensions over Ukraine, Gref described that amount as “insignificant”.

Real trouble might happen should capital outflows reach $100 billion in 2014, as the economy will likely post a zero or even negative growth, he said.

Capital outflows amounted to $35 billion in the first two months of this year, the bank head added. “By the end of the year, the outflows will be significantly larger than expected. It will be even larger than $55 billion (outflow) in the previous years.”

The High School of Economy, a leading Russian think tank, forecast in March that the Russian economy would head to stagflation in 2014 with sluggish economic growth and hiking inflation rate.

Shrugging off the warning, President Vladimir Putin said that the country’s economy was stable despite “certain problems,” citing that the country’s economy grew 1.3 percent in 2013.

Sberbank accounted for 28.6 percent of aggregate banking assets in Russia as of November 2013.