Russia Facing Recession as Western Sanctions Bite

Russia's economy is likely to contract again in the second quarter, plunging the country into recession, Russian economy minister Alexei Ulyukayev has said.

Gross domestic product could fall between 0.0% and 0.1% from April to June, after shrinking 0.5% in the first three months of the year, Ulyukayev said.

The prospect of a technical recession - six straight months of negative growth - was possible, he added.

Moscow's forecast came after the International Monetary Fund said that Russia was in recession.

Russia suffered severe capital flight in the first quarter of 2014, when investors withdrew $50.6bn (£30bn, €36.6bn) over the intervention in Ukraine and annexation of Crimea. Some analysts estimated that capital outflow reached more than the $63bn total that left Russia in 2013.

The economy minister spoke out after the European Union announced a fresh wave of sanctions against 13 individuals and two companies in Crimea, the Black Sea province that Russia annexed from Ukraine in March following a disputed referendum.

Ulyukayev said the central bank should lower its key lending rate, which has been raised to 7.5% in the past two months.

"I would do it [cut rates], based on the economic situation and on the basis of the forecast for inflation," he said.

Inflation has soared in recent months as the Russian rouble has declined in value. Ulyukayev said the rate could peak at 7.5% to 7.6% in May and stay that way throughout June.