Russian ruble collapses to 7-month low

The plunge in oil prices and Western sanctions over Moscow’s role in the Ukraine crisis have pummelled the Russian economy in recent months, with the ruble collapsing in value.

Russia’s Ministry of Economic Development on Tuesday downgraded its forecast for the nation’s gross home product (GDP) this yr to a 3.3 % lower, down from a earlier estimated decline of 2.8 %. According to the minister, IMF’s 0.2 percent growth forecast for Russian Federation is too pessimistic. Ulyukayev said the measures, which curb access to capital markets, will remain through 2018.

Oil prices have fallen to their lowest point in six years, causing huge problems for the Russian currency.

The bump in the ruble coincided with improvements in oil prices, with the worldwide oil benchmark Brent crude gaining 2.29 percent to reach $43.45 per barrel.

Russia’s dollar-denominated RTS index fell 4.21 percent at opening as the ruble tumbled to 70.92 against the dollar, its weakest against the greenback since December 2014. That’s stoking inflation, which accelerated to a 13-year high of 16.9 percent in March.

It’s the second time this year the Economy Ministry has cut its forecast.

Alexei Ukyukaev, Russia’s minister of economic development, believes that oil prices could fall even further to below $40 per barrel. GDP may contract 5.7 percent in 2015 under that scenario, the regulator said.