WASHINGTON -- A sharp depreciation in the value of Russia's currency ruble added further pressure to the country's economy already weakened by plunging oil prices and Western sanctions, leading US experts said.

 

The oil-dependent economy, they estimated, would contract about five percent next year if oil prices stay at around 60 US dollars a barrel.

 

The ruble plunged to an all-time low in mid-December and had lost more than 45 percent of its value against the dollar since January, becoming one of the world's worst-performing currencies this year, as the gloomier Russia economic outlook drove investors to sell rubles.

 

Russia's central bank last week dramatically raised its key interest rate to 17 percent from 10.5 percent, in a bid to tamp down inflation and stem the currency's tumble. However, the surprise move, instead of reversing the downturn, only spooked markets further. The battered ruble, at one time, fell to a record low of 80 against the dollar from the average of 30 seen in the first half of this year.

 

Ruble's tumble was driven by "a combination of many factors," including the sharp decline of oil prices, the impact of financial sanctions on Russia, the slow growth in emerging markets as well as weaker commodity prices, Hung Tran, executive managing director at the Institute of International Finance (IIF), a leading global association of about 500 financial institutions, told Xinhua.

 

Tran said the stunning interest rate increase "failed to support the ruble," but the currency seemed to "have stabilized" at around 60 against the dollar after both the Ministry of Finance and Russia's central bank announced new measures to shore up the value of the ruble, including spending foreign reserves as much as 7 billion dollars.

 

"It is very small compared with the reserves at the central bank of Russia, but it signals the intention of the government to act in coordination with the central bank to support the ruble," he said.

 

If current measures are not enough to arrest the ruble's free- fall, Tran said the Russian government could introduce capital controls as the next step to prop up the currency

 

"One measure that has been raised and discussed is to require Russia exporters to turn in and sell their foreign-exchange earnings they generated overseas back to the central bank of Russia within a certain limited time," he said.

 

But Anders Aslund, a Russia expert and senior fellow at the Peterson Institute for International Economics, a Washington DC- based think tank, told Xinhua: "Russia is very reluctant to have any currency controls," because of policy experiences and massive capital outflows where capital controls remained in place until 2006. It's possible that will be introduced but not easily," he added.