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SINGAPORE — The Asia-Pacific will overtake Europe as the region whose tourists spend the most money overseas within 10 years, a report said Wednesday, driven by an explosion in the number of Chinese travellers.

Spending by tourists from the Asia-Pacific will reach nearly $753 billion by 2023, increasing the region's share of global spend to 40 per cent from 25 per cent in 2012, according to a report commissioned by travel technology firm Amadeus.

Travellers from Europe will account for 34 per cent of global outbound spend by the same year, down from 45 per cent in 2012, the report indicated.

"The findings underscore what most of us already intuitively know — that we have now truly arrived in the Asian century," Amadeus Asia Pacific President Angel Gallego said in a statement.

"No matter where we look, Asian travellers have and will continue to change the landscape of travel, and business must adapt to them or risk falling behind," he added.

In January, the state-run China Daily said Chinese travellers spent $102 billion overseas in 2012, making them the world's biggest spenders ahead of German and US tourists.

They are almost certain to have surpassed that record last year, noted the report.

Visitor flows from Asia over the next decade is forecast to grow at an annual average rate of 15 per cent — nearly double the preceding 10-year period and faster than any other region, said the report written for Amadeus by forecasting firm Oxford Economics.

Driving this expansion is the explosive growth in the number of travellers from China, the report showed.

The Asian economic powerhouse is set to surpass the United States this year as the world's largest source of outbound travellers and is poised to become the biggest domestic travel market globally by 2017, it said.

China's share of global outbound travel is projected to reach 20 per cent by 2023 — up from just 1 per cent in 2005.

China's economy has boomed over the past decade, expanding the ranks of its middle-class who are hungry for foreign travel after the country's decades of isolation in the last century.

European Union and Asian countries have moved to ease visa application procedures for Chinese tourists in recent years, keen to cash in on their big-spending habits.

The report also predicted that global travel would expand 5.4 per cent per year in the next decade, faster than the projected growth of 3.4 per cent for world gross domestic product in the same period.

Business travel, which was hit by the global financial crisis that started in late 2008, is also expected to bounce back.

Asia will account for 55 per cent of global business travel growth during the forecast period, the report indicated.

TOKYO — Prices rose across Japan Tuesday as a controversial sales tax rise came into effect, with everything from beer to washing machines costing more, sparking fears a drop in consumer spending will derail a nascent economic recovery.

Tokyo hiked the levy to 8 per cent from 5 per cent as it looks to control a public debt mountain, but corporate Japan's concerns were highlighted by a closely watched survey of business sentiment showing bosses are cautious about the future.

In a country beset by years of deflation, critics warn that already thrifty consumers would snap their wallets shut.

Millions of shoppers made a last-minute dash to stores in recent weeks, while nervous retailers are now watching for signs of falling sales.

The last time Japan rolled out a higher sales levy, in 1997, it was followed by years of deflation and tepid growth, although other factors, including the Asian financial crisis, were also blamed.

Among those waking up to the higher prices was 18-year-old university student Hibiki Ishida, who was not impressed when he bought his favourite chewing gum on Tuesday.

"I get this gum every morning and I know the price is 120 yen ($1.15)," he said. "But I handed 120 yen to the shop clerk today and she told me it was now 123 yen — that unnerved me."

Others, like a 20-year-old graduate surnamed Yoshida — who is set to start a new job and live on her own — have been planning for the hike, with some help.

"My mother has given me lots of daily stuff like tissue paper and plastic cling wrap," she said.  "So I can survive for the time being."

The rise has presented a huge challenge for Prime Minister Shinzo Abe since he swept to power in late 2012 on a ticket to drag the world's number-three economy out of a cycle of falling prices and tepid growth.

Nervous retailers 

On Tuesday, defending the rise — which could be followed by another, to 10 per cent — Abe pointed to spiralling healthcare and social welfare costs, which are straining the public purse in a rapidly ageing society.

The rise "is meant to offset increases in social security costs over the years and to maintain the country's trust", he told reporters, adding that the battle to defeat years of growth-sapping deflation would continue.

But a Kyodo news agency poll earlier this year said about three quarters of Japanese felt no impact from the growth efforts, which included an unprecedented monetary easy programme by the Bank of Japan (BoJ) that helped sharply weaken the yen and boost company profits.

Retailers launched special deals to keep customer traffic steady, such as offering more points on shopping cards or promising a boost to the quality — and in some cases, volume — of their pricier products.

"There is a risk that my sales will drop," said Masayuki Komatsubara, who runs a small Tokyo shop that sells seaweed and other dried food products. "I'm going to try to find cheaper stuff with the same quality...so that my prices don't rise too much."

Grocery store giant Inageya said it had to temporarily shut half its 130 locations Tuesday, after technical problems tied to adjusting cash registers for the rate hike.

Earlier in the day, a closely watched BoJ survey showed that business confidence soared to a more than six-year high in the January-March quarter.

However, companies were cautious about the future as the survey of more than 10,000 firms pointed to lukewarm investment and slumping sentiment for the April-June quarter.

"Firms are cautious about the future course of the economy as the impact of the tax hike remains uncertain," said Hideki Matsumura, an analyst at Tokyo's Japan Research Institute.

While Toyota, Panasonic and other major companies are boosting wages for the first time in years, exports are still struggling and Japanese factories logged a surprising drop in February output.

Tokyo's bid to stoke lasting inflation appear to be taking hold which, together with higher prices due to the tax rise, has exacerbated concerns that the economy could lose its momentum.

The government has launched a special budget to help counter any slowdown while some are looking to the BoJ's easing campaign to help soothe the impact of a fall in consumer demand.

"I believe in three months' time we will be saying the impact on the economy from the tax increase wasn't that bad," Yuki Endo, an economist at Hamagin Research Institute, told Dow Jones Newswires. "The economy will overcome the tax hike."

HONG KONG — The Asian Development Bank (ADB) on Tuesday said growth in developing Asia will edge higher over the next two years, but faces being constrained by China's campaign to cool its economy.

The Manila-based lender said in a forecast that adjustments in China, the world's second-largest economy and a key growth driver, could offset improving demand as growth picks up in advanced economies such as the United States, Europe and Japan.

The ADB estimated that gross domestic product (GDP) for developing Asia, which covers 45 nations, will grow 6.2 per cent this year before edging up to 6.4 per cent in 2015. Last year, the region expanded by 6.1 per cent.

"At this rate, developing Asia will remain the fastest-growing region in the world and the largest contributor to global growth," ADB deputy chief economist Zhuang Juzhong told a press conference in Hong Kong.

However "East Asia will see its growth trend flatten as growth moderates in the People's Republic of China," the lender said in its Asian Development Outlook 2014 statement, citing Chinese authorities' efforts to control credit growth.

"The regional growth outlook depends on continued recovery in the major industrial economies and on the People's Republic of China managing to contain internal credit growth smoothly," it added.

The ADB expects China's economic growth to slow to 7.5 per cent this year, and a further drop to 7.4 per cent in 2015, from 7.7 per cent last year.

"The government continues to shift priority towards quality of growth. This may slow China's growth in the short term but will make growth more sustainable in the longer term," Zhuang indicated.

At a separate briefing in Beijing, ADB economists said China's efforts to rebalance its economy are bearing fruit.

China's service sector grew more strongly last year than did industry and now accounts for a larger share of GDP, indicated Jurgen Conrad, who heads the ADB's economics unit in China's capital.

He described that as "a major achievement from the point of view of domestic rebalancing", though he added that the economy was still mainly driven by investment growth even as consumption showed strength.

China's leadership says it wants to transform the country's growth model away from an over-reliance on often wasteful investment and instead make private demand the driver for more sustainable future development. 

The ADB forecast the South Asia region to grow by 5.3 per cent this year, relying on continuing reform in India which is "operating below its potential" with a forecast 5.5 per cent expansion in 2014. 

Southeast Asia suffered a blow last year with softened export and economic slowdowns in various countries, as GDP decelerated to 5 per cent last year. The ADB said similar expansion is expected in 2014. 

It also warned that US tapering could bring fluctuations in financial markets although the risks would be "manageable".

"Developing Asia now is in a much better position to weather shocks like that," Zhuang said, adding that many countries in the region have surpluses and stronger banking systems.

Founded in 1966, the ADB aims to reduce poverty in Asia by helping its 67 member countries evolve into modern economies through investment in infrastructure, financial and public administration and health services.

AMMAN — Industry, Trade and Supply Minister Hatem Halawani discussed with two Sudanese ministers on Monday the mechanisms needed to enhance investment and commercial relations between Jordan and Sudan. According to a press statement received from the Ministry of Industry, Trade and supply, Halawani told the visitors that protocols and memoranda of understanding should not be kept on desks and that the private sector in both countries should seize opportunities to elevate the level of cooperation. He stressed Jordan’s readiness to provide all technical support to Sudan whether in terms of parallel consumer markets or industrial/free zones. Halawani expressed hope that the Joint Higher Committee’s technical and ministerial panels meeting presently in Amman would come up with practical results to advance Jordanian-Sudanese economic ties. The statement said Jordan is keen to raise the level of investments in Sudan noting that more than $1 trillion are invested in the industrial, agricultural and financial sectors.  The ministers mentioned opening marine transport channels as a viable conduit to activate bilateral trade. 

DUBAI, United Arab Emirates — Despite improvements in regulations and moves to diversify Arab economies away from natural resources, global investors remain wary of doing business in Gulf countries because of regional upheaval and other potentially destabilising factors, according to a report by The Economist Intelligence Unit (EIU) released Monday.

The report found that investors are also "moving cautiously" in the region because of concerns over government transparency, foreign ownership restrictions and difficulties in enforcing commercial laws.

However, successful bids by Dubai to host the World Expo in 2020 and by Qatar to host the FIFA World Cup in 2022 have helped put a spotlight on investment opportunities in the Gulf, said the report, which was sponsored by Merck Serono, the biopharmaceutical division of Merck.

According to experts quoted in the report, Arab Spring protests have scared investors, even though the Gulf region did not experience the kind of upheavals seen in Yemen, Egypt, Syria and Libya. 

Protests by Shiites in the tiny island-nation of Bahrain threatened to spill over into Saudi Arabia's eastern region, where the kingdom's minority Shiites mostly reside.

"The Arab Spring has had a negative impact on perceived stability. Even where you haven't had a major event, political risk is more on investors' minds than before," chief economist for the Middle East at Citi Group, Farouk Soussa, said.

He indicated that in some cases, capital has flocked from the wider Middle East to Gulf countries seen as stable, like the United Arab Emirates (UAE). 

The Arab Spring has also opened opportunities for wealthy Gulf governments to reinforce ties and influence with countries like Egypt, where billions of dollars have been invested and given in aid.

With rising unemployment and a population of which nearly half is under the age of 25, Saudi officials have promised more than $100 billion in state jobs and other handouts. The kingdom's Gulf neighbours have also opened their treasuries to literally buy time and avoid protest demands for wider reform.

The EIU says this kind of economic model "tends to crowd out entrepreneurship" by keeping the focus on oil extraction, which is the main source of revenue.

The report concludes that foreign investment is still less than before the 2008 financial crisis across most of the six-nation Gulf Cooperation Council (GCC), comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.  

The exception is Kuwait, where as in Bahrain, the majority of foreign investments have come from other GCC countries, according to the latest data provided in the report.

LONDON — African government efforts to force mining companies to process minerals before export may backfire as they come up against weakening commodity prices and investor demands that firms reduce risky investments.

In the last year alone, Zimbabwe, Zambia, Democratic Republic of Congo (DRC), Namibia, South Africa and others have hinted at, announced or put in place measures aimed at adding value to minerals exports, which would boost tax revenue, encourage formation of new businesses and add jobs.

But with falling metal prices and a drastic reduction in the capital available for the mining industry, wary companies are increasingly shying away from investment in countries where the rules of the game can change quickly.

“Investment sentiment in the last year has moved against the mining sector, but the governments tend to have a lagging view of how this is going to affect investment in their countries,” said Mike Elliott, global mining and metals leader at Ernst & Young.

“They continue to argue that mining needs to make a bigger contribution to their economies, but you’ll have to see investment severely tail off to make them think they need to attract investment rather than scare it away,” he added.

According to consultants, governments could find more targeted and effective ways of adding value to local economies.

For example, they could push local companies that provide services for the mining industry such as logistics, security, catering and construction to become more competitive and then tighten regulation around the procurement of such services, consultant Tom Wilson at Africa Practice suggested.

“Ultimately you can’t turn market forces on their head. You have to figure out where the country has the capacity to fill the need for goods and services and provide some structures that actually help indigenise some businesses,” Wilson said.

The top five mining companies are slashing total capital spending from a peak of about $70 billion in 2012 to an expected $46 billion in 2015, according to Reuters I/B/E/S.

Mining firms have been taking costly writedowns following years of risky bets to pursue growth, and they now need to prove to shareholders they can use their cash more wisely.

“Companies need to decide whether they wish to continue mining in these countries and face what the governments want to do in terms of beneficiation or pull out. And in some cases it will be a pull-out strategy,” said Kevin Goodrem, vice president of beneficiation for De Beers Group.

The hard line

Zimbabwe, which holds the world’s second-largest platinum reserves after South Africa, has taken a hard line. President Robert Mugabe late last year threatened to stop exports of raw platinum in a bid to force mining firms to process the metal domestically.

The government said last month it had short-listed two companies to build a refinery by 2016, but industry players expect the project will take much longer than two years.

A source at a mining company operating in southern Africa said the volumes mined in Zimbabwe are not enough to make construction of a $2-$3 billion refinery economically viable, and he was sceptical that the energy supply would be sufficient to run it.

But companies operating in Zimbabwe, which include top world platinum producers Anglo American Platinum and Impala Platinum Holdings, have to remain engaged with the government to avoid losing assets.

“For the platinum miners who operate in Zimbabwe, it is a very concerning time. And it is a bit of a tragedy for Zimbabwe, because they are a very significant producer, but no global capital is going to go there today with that policy uncertainty,” Elliott said.

The DRC and Zambia, Africa’s largest copper producers, are also trying to boost downstream investment.

Kinshasa is trying to implement a ban on exports of copper and cobalt concentrates but has so far encountered the resistance of the powerful governor of Congo’s copper-producing Katanga province.

Many in the industry say the ban is unrealistic as acute electricity shortages hamper processing activities in Congo.

In Zambia, President Michael Sata in October revoked a law that had suspended a 10 per cent duty on exports of unprocessed minerals including copper, iron, cobalt and nickel.

Miners say that although some plants are being built, Zambia does not have enough smelting capacity to process all its copper, so they are accumulating high stocks of concentrate.

“Some of these countries are trying to run before they can walk,” remarked Deutsche Bank analyst Robert Clifford.

“I understand why they want to do it, but they have to provide some assurance to companies that they are not going to pull the rug out from under their feet and change the rules once they have spent billions of dollars,” he said.

Also new smelters and plants may not make sense if their products are expensive and uncompetitive in global markets.

Mining experts say governments should avoid blanket policies and instead target parts of the industry that will actually benefit from downstream investment.

They cite Indonesia’s controversial ban on exports of unprocessed mineral exports as an example.

The ban is expected to boost downstream processing investment in the next few years in nickel, where the country is competitive. But in copper, it is expected to achieve little besides souring the relationship between the government and producers.

Wary of the risks, Namibia seems to have taken a softer approach so far. The government has commissioned a study to identify the commodities it would be more beneficial to process.

“You have to be careful with value-addition policy, because the risk is that it could be value disruptive,” said Magnus Ericsson, founder of the Raw Materials Group, a consultancy that advices governments and companies on mining issues.

“One policy doesn’t fit all. That’s a recipe for disaster,” he added.

TOKYO — Japan is bracing for its first sales tax rise in years, with last minute shoppers buying up a host of goods from gold to ice cream, as the government tries to tackle its crushing national debt.

Millions of shoppers are making a mad dash to stores ahead of Tuesday’s tax rise to 8 per cent from the current 5 per cent amid fears the increase could spark the return of a protracted economic slump.

The last time Japan brought in a higher levy in 1997, it was followed by years of deflation and tepid economic growth.

The upcoming hike has created a tricky balancing act for Prime Minister Shinzo Abe as he tries to nudge the world’s number-three economy out of the cycle of falling prices and lacklustre growth with a growth blitz dubbed Abenomics.

On Friday, fresh data showed Japanese consumer prices rose again in February, suggesting Tokyo’s efforts to slay 15 years of deflation was gathering steam.

But the increase was largely driven by rising post-Fukushima energy import costs, rather prices going up on the back of strong, across-the-board consumer demand — dubbed “good” inflation by some economists.

A key worry is that Japan’s last tax rise deterred consumers and foreshadowed the drop into a cycle of falling prices — although other factors, including the Asian financial crisis, were also blamed. The slowdown saw Japan’s powerhouse economy descend into a protracted slump.

Opinion is mixed over whether history will repeat itself.

Tokyo’s special budget to counter a tax-linked slowdown and the Bank of Japan’s unprecedented monetary easing were likely to offset a drop in spending, according to some analysts.

“Daily necessities may not be affected very much by the tax hike, but demand for cars, furniture and houses is likely to drop temporarily,” said Kenji Yumoto, vice chairman of the Japan Research Institute.

“We’ll see whether the inflation is good or bad only after we see the impact of the tax hike. If demand later recovers, that could lead to good inflation,” he added.

Few shoppers seemed inclined to wait for prices to go up in a country where consumers have become used to paying pretty much the same, year after year, for their televisions, beer and sushi.

Falling or static prices may sound great for household budgets, but Japanese wages have barely moved over the years and the cycle has meant shoppers tended to hold off buying in the hope of getting goods cheaper down the road. That, in turn, hurt producers and slowed economic growth.

Shoppers go for gold

The tax rise — a seemingly modest increase compared with many countries’ consumption levies — has ushered in some less-than-typical shopping habits.

Staff at jewellery chain Tanaka Kikinzoku watched wide-eyed as gold sales surged fivefold this month from a year ago with customers converging on a shop in Tokyo’s glitzy Ginza district so they could buy 500 gramme bars for 2.3 million yen ($22,500) apiece.

“We’ve seen unusual demand for gold,” Tomoko Ishibashi, a spokeswoman for parent company Tanaka Holdings, told AFP. “Some customers bought now to avoid the extra tax levy from April 1, but that’s not the only factor.”

With prices on the rise across the nation of 128 million, some gold-hungry customers may be betting on the perceived safety of the yellow metal, she said. “Gold is known for its price stability and people in general aim to hold it for a long period time.” 

While some firms are absorbing the higher tax fearing a drop in customer traffic, many others are raising prices as a sharply weaker yen has jacked up their own import costs.

Beverage giants Asahi and Suntory are raising the price of vending machine bottled drinks, while QB House, a 1,000 yen-a-head haircut chain, said prices will go up a full 8 per cent to 1,080 yen. The company reasoned that it kept its thrifty rates capped despite the last tax rise, when the levy rose to 5 per cent from 3 per cent.

The kids — and adults — who depend on Japan’s ubiquitous vending machines for their ice cream fix are sure to be disappointed as some of the sweet treats’ prices rise by 10 yen to 160 yen at 20,000 locations operated by Ezaki Glico.

But the confectioner insisted customers will not be short-changed.

“This is not just a price hike,” a company spokeswoman said. “We will update our products with higher quality or more volume.”

AMMAN — Arab Bank will be distributing cash dividends to shareholders at a rate of 30 per cent following the approval of shareholders during an ordinary general assembly meeting last week. The dividends amount to JD160.2 million taking into consideration that between 2009 and 2013, cash dividends distributed by the bank totalled JD667.5 million. Moreover, shareholders approved during an extraordinary session the distribution of a bonus share for every 15 shares held by investors. Subsequently, the bank’s capital will increase to JD569.6 million. In a statement issued by the bank on Saturday, the general assembly also elected a new board of directors for the coming four years. Sabih Al Masri was elected chairman and Samir Qawar vice chairman. Members comprise the Saudi ministry of finance, Jordan’s Social Security Corporation, Abdul Hamid Shoman Foundation, Nazek Al Hariri, Mohammad Al Hariri, Omar Razzaz, Bassam Kanaan, Wahbeh Tamari and Abbas Farouq Zueitar. 

BASRA, Iraq — One of the biggest undeveloped oilfields in the world has begun commercial production in south Iraq, officials said Saturday, part of ambitious plans by Baghdad to dramatically ramp up output.

The announcement was made during a ceremony attended by Oil Minister Abdul Karim Al Luaybi and Deputy Prime Minister Hussein Al Shahristani, as well as officials from Russian energy giant Lukoil, the principal firm developing the enormous West Qurna-2 field.

It comes just weeks ahead of parliamentary elections, with the country looking to fund reconstruction of its dilapidated infrastructure and economy by upping crude sales.

"Production started today," said Nasir Hashim Fakhr, the Iraqi oil ministry official charged with the development of West Qurna-2 field in the southern Basra province.

Fakhr told reporters initial production was about 120,000 barrels per day (bpd), but that output would rise to 420,000 bpd by the end of the year.

Lukoil President Vagit Alekperov said in a statement that the target was initially hit on Friday at West Qurna-2, one of the world's biggest undeveloped oil fields with known reserves of 12.9 billion barrels.

The Russian firm had initially partnered with Norway's Statoil on the West Qurna-2 field, signing a 20-year deal in early 2010 under which they were to increase production at the field to 1.8 million bpd, with fees of $1.15 per barrel extracted.

In May 2012, however, the Norwegian company sold its stake to Lukoil, and the production target was later lowered to 1.2 million bpd.

Iraq has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic metres of gas — both among the highest such deposits in the world.

Baghdad is heavily dependent on oil exports for government revenue, and the authorities are seeking to dramatically ramp up sales.

The country is looking to increase its production capacity to 9 million bpd by 2017, a target the International Monetary Fund and International Energy Agency have warned is too ambitious.

It currently produces about 3.5 million bpd, with exports in February reaching 2.8 million bpd, the highest such figure in at least a quarter century.

NOVO-OGARYOVO, Russia — President Vladimir Putin said on Thursday that Russia would develop its own credit card system to reduce reliance on Western-based companies and soften the potential blow from US and European union (EU) sanctions.

Putin voiced his support for plans described by senior officials to create a domestic-based system in response to restrictions placed on Russian banks last week by Visa and MasterCard, which are widely use by Russians. 

"We certainly must do this, and we will do it," Putin told senior Russian lawmakers during a meeting that mainly focused on efforts to integrate the Crimea region after he signed legislation to make it part of Russia last week.

Visa and MasterCard last week stopped providing services for payment transactions for clients at Bank Rossiya, under US sanctions over what the West says is Russia's illegal annexation of Crimea from Ukraine.

The two payment systems also suspended services for clients at several other banks whose shareholders are on the US sanctions list. They resumed services after the US government said this did not mean the banks were subject to sanctions.

"It is really too bad that certain companies have decided on ... restrictions," Putin said, without naming Visa or MasterCard. "I think this will simply cause them to lose certain segments of the market — a very profitable market."

Russia has been largely integrated into the global economy since the 1991 collapse of the communist Soviet Union, but the biggest confrontation since the Cold War has led officials to look for ways to reduce reliance on the West.

After hitting Russian officials and lawmakers with visa bans and asset freezes over the annexation of Crimea, the US and EU are threatening measures affecting entire economic sectors if Russia escalates the crisis.

Western states have emphasised they do not recognise Crimea as being part of Russia, but Putin — his popularity boosted by the acquisition — has pressed ahead with steps to integrate the Black Sea Peninsula. 

"We must do everything as swiftly as possible so that those who live in Crimea... feel like fully-fledged citizens of the Russian Federation," Putin told the senior lawmakers.

Separately, Russian officials have dramatically reduced growth forecasts for this year and acknowledged the annexation of Crimea will spur capital outflows and hurt investment, but they have not ripped up the old script entirely.

At an investment conference on Thursday, Russia's central bank head and finance and economy ministers were sanguine, boasting they had ways to protect the economy against the fallout from the worst East-West standoff since the Cold War.

Most would not have to be used, they said, and the crisis over Crimea could eventually help the economy become more self-sufficient, a message which chimes with Putin's longstanding drive to bring money home from abroad.

But while sticking to a protocol agreed last week with Putin for all public comments to refer to economic and financial stability, Russia's three leading financial officials were clearly making preparations for the worst.

Having already stopped referring to the official growth forecast for 2.5 per cent this year, Economy Minister Alexei Ulyukayev said it could instead slow to 0.6-0.7 per cent if capital flight reached $100 billion this year. 

The economy ministry has estimated capital outflows of up to $70 billion in the first quarter alone.

"[With] an outflow of $150 billion, growth becomes negative," he said, suggesting Russia could tumble into recession for the first time since the aftermath of the global financial crisis in 2008-09.

In the first estimate by a leading international body, the World Bank said on Wednesday Russia's economy could contract markedly this year and see record capital outflows of $150 billion if the crisis over Crimea deepens.

It said Russia's gross domestic product (GDP) could shrink by 1.8 per cent, hurt by uncertainty over future measures the West may take to punish Russia for annexing Crimea.

Economists have also said Russia's economy would suffer badly if the price of oil, its main export item, were to fall.

A Reuters poll of analysts on Thursday showed that increasing oil supplies coupled with sluggish global demand will push oil prices lower in 2014, with further falls expected in 2015 and 2016. 

Russia's former finance minister, Alexei Kudrin, agreed, saying it was not the sanctions themselves that were damaging the economy but the expectation of more, possibly targeting trade or finance, and also how Moscow would retaliate.

"All this affects the amount of capital outflows and investments. The general atmosphere of uncertainty about Russian policy in these circumstances is also a deterrent," he said.

"My forecast for economic growth is about zero, plus or minus 0.5 per cent," he added, pegging outflows at $150-160 billion.

He noted that this was what it cost to pursue an independent foreign policy and society was so far prepared to agree to such a cost.

"We are paying hundreds of billions of dollars for this, hundreds of billions, and we will see lower GDP growth, investment and revenues," Kudrin indicated.

For now, most officials are at least publicly backing Putin's decision to pursue his strident foreign policy, forcing their financial colleagues to come up with ways to plug the gap.

Ulyukayev urged a loosening in budget funds to help spur investment, possibly from oil revenues.

Finance Minister Anton Siluanov said he was ready to offer companies the same emergency measures adopted during the 2008-2009 financial crisis when the government spent billions of dollars, or about 8 per cent of GDP, bailing out Russia's major banks and companies.

He suggested using funds from the National Wealth Fund, a sovereign fund financed from oil taxes designed to support the pension system, which as of March 1 stood at $87.3 billion.

Central Bank Governor Elvira Nabiullina also promoted a plan to ease borrowing at home, pointing to three-year refinancing for banks secured by state-backed investment projects as a way of reducing reliance on Western finance.

But for the time being, the overall message was relatively upbeat.

"We expect that one of the consequences of these recent events could be an increase in demand for credits inside the country, if access to lending abroad is reduced for companies and banks," Nabiullina said.