UPDATE: Econ ministry cuts GDP estimate to 1.7% in Jan, 1.3% in Feb

(Adds details in paragraph 7)

MOSCOW, Apr 16 (PRIME) -- The Economic Development Ministry has reduced Russia’s gross domestic product (GDP) estimate to 1.7% from 1.9% in January and to 1.3% from 1.5% in February, it said in a research note on Monday.

It added that industry, professional services and financial markets were the major contributors to the growth.

The domestic markets has overreacted to the latest set of sanctions imposed by the U.S. against several Russian companies and individuals, the document also read.

“The announcement of new sanctions led to adjustment of risk assessment by financial market players. From April 6 through April 10, the ruble weakened by 9.3%, or 5.3 rubles, against the U.S. dollar to 63 rubles per U.S. dollar… The stock market was highly volatile, too,” the authority said.

“The MOEX Russia index lost around 5% in the period. However, the results of the next few days demonstrated that the initial reaction of the markets was somewhat excessive.”

The ruble weakening may translate into growth of inflation only if it persists for a long time, the ministry said and added that inflation is expected at 0.3-0.5% in monthly terms and 2.3-2.6% in annual terms in April.

The authority sees the long-term equilibrium rate of the Russian ruble at 50 rubles per U.S. dollar.

The ministry is sure that the government has a wide range of tools to absorb the risks from external shocks both at the local and the systemic levels.

The sanctions are able to impact Russia’s economy only if there are lengthy negative dynamics on the financial markets, it added.

End