Russia’s growth forecast over the next two years has been slashed by the World Bank.

It said the economy is set to stagnate as the country pays the price for the Ukraine crisis, as well as a lack of structural reforms and uncertain economic policy.

The Bank’s experts point out consumer demand and investment are falling linked to the weaker rouble, rising inflation and limits on borrowing.

The World Bank previously forecast GDP growth this year of 1.1 percent but now sees it at 0.5 percent.

Next year it believes the economy will expand by just 0.3 percent rather than 1.2 percent.

The latest Western sanctions include targeting Russia’s ability to develop oil and gas projects, essential for its budget.

The World Bank’s reduced growth forecasts assume no new sanctions either on or by Russia over Ukraine.

It warned that if the Ukraine crisis escalates, Russia’s economy could contract by nearly one percent next year.

Conversely it said if sanctions were lifted, growth could be as high as nearly one percent.

The World Bank economists commended Russia’s central bank for shifting policy to focus on reducing inflation from next year and away from propping up the rouble.

But they warned of the challenges of operating in an environment with both high inflation and low growth risks.

with Reuters