Recession-hit Russia hoping for growth by end-2016

Russia's economy is still flatlining after more than two years of crisis, figures showed Monday, with Moscow hoping to end 2016 on the mend but with longer-term prospects looking gloomy.

State statistics agency Rosstat said the economy contracted by 0.4 percent year-on-year in the third quarter, confirming estimates by the economy ministry.

While little to cheer about in itself, the figure is less than the 1.2 and 0.6 percent contraction seen in the first and second quarters respectively, suggesting the economy has been stabilising over the summer.

The longest crisis since President Vladimir Putin took power 16 years ago -- sparked in late 2014 by falling oil prices and Western sanctions over Moscow's actions in Ukraine -- appears to be gradually relenting.

The recession has been accompanied by a surge in prices and has hit Russians' spending power hard, especially for the poorest.

Economy Minister Alexei Ulyukayev last week predicted that fourth-quarter figures would be "visibly" more positive.

His ministry predicts a contraction of the economy of 0.6 percent for 2016 as a whole -- it plunged by 3.7 percent in 2015 -- and growth of around one percent in 2017.

The central bank said on Monday that it saw barely-there growth of around 0.1 percent in the third quarter -- which would mark the end of the recession -- but stressed this was within the statistical margin of error. It hopes for growth of 0.2 to 0.3 percent in the fourth quarter.

More pessimistic experts at Capital Economics said the Rosstat figure "appears to be consistent, by our estimates, with a shallow fall in GDP in quarter-on-quarter terms".

They predicted a "return to positive (albeit sluggish) growth by early next year."

- Sanctions pain -

Entire sectors of the Russian economy -- banking, oil and defence -- are still under Western sanctions which complicate their financing.

A relaxation of sanctions still appears very uncertain despite leaders gaining power in the West seen to be more open to Moscow's point of view, such as Donald Trump in the United States.

Putin and Trump, who spoke on the phone Monday evening, have backed a "normalisation" of ties when the new US leader takes office, the Kremlin said.

Authorities in any case realise that without reforms to liberalise and diversify the economy, the country will not be able to hit growth rates high enough to cover large outgoings such as the cost of its military, currently deployed in Syria and facing a NATO build-up.

"We expect that in the next three years, the external conditions for our economy will remain, unfortunately, difficult. And the domestic conditions will not be easier either," central bank chief Elvira Nabiullina told parliament on Monday.

She cautioned that so far, signs of a revival are "still very patchy and unsteady".

The central bank chief has constantly called for structural reforms in Russia, including reduced dependence on the nation's oil and gas resources.

Last week, the World Bank said in a report that Russia's current movement towards recovery "is unlikely to turn the tide in terms of building a more diversified economy".

It called on Moscow to boost investor sentiment "by reducing policy uncertainty" and also to address the ageing of its population.

It notably called for an urgent rise in the retirement age -- set in 1932 at 55 for women and 60 for men -- an idea the economy ministry has also backed.

But major reforms are unlikely before the next presidential elections in 2018.