The bank said in its updated economic outlook for the country that the economy would shrink by 2.7% this year before growing by 0.7% next year, and 2.5% in 2017. This is an improvement from the bank’s April outlook when it expected Russia’s economy to contract by 3.8% this year and by 0.3% next year.

In April, the country’s economic contraction deepened further due to a slump in foreign trade transactions and the impact of Western sanctions and geopolitical tensions following the country’s annexation of Crimea, according to the bank.

However, in recent months global oil prices have started to stabilise, kick-starting the economic recovery process in Russia.

‘The revised forecast is largely driven by the adjustment in oil prices over the previous two months that is supporting the ruble exchange rate and a slightly faster retreat of inflation,’ said Birgit Hansl, World Bank lead economist for the Russian. 

‘That would allow the Central Bank of Russia to pursue monetary easing at a more rapid pace for the rest of 2015, as a result bringing down borrowing costs and increasing lending to firms and households. Both investment and consumption growth would contract slightly less than previously expected.’

Hansl urged Russia to commit to structural reforms, as significant downside risks to the bank’s projections remained.

He said: ‘Fiscal policy is expected to follow a consolidation path over the next two years with some improvement in the fiscal balance as oil revenues stabilise.’