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IMF: Russian Economy Will Contract 0.6 Percent in 2016, Recover In 2017

A worker stacking sacks of sugar in a distribution warehouse at the Karachay-Cherkessia Sugar Factory in Russia

The International Monetary Fund said the Russian economy should continue to contract this year, with gross domestic product dropping 0.6 percent, but says it will begin recovering in 2017.

The projections from the Washington-based IMF, issued November 29 after a team visited Moscow earlier this month, were roughly in line with other Russian and Western forecasts.

The IMF said dual shocks from low oil prices and Western sanctions have been absorbed by the Russian economy, and rising oil prices will push the recovery in 2017.

Inflation is projected to decline to 5.6 percent by year's end and fall further over the course of 2017, it said.

The IMF cautioned that "fiscal consolidation" should rely on better targeted and more permanent structural reforms.

The pension system, tax exemptions, and subsidies all required reforming, it said, along with protecting public and human capital investment.

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