LONDON: Russia’s economy will contract next year as a result of the crisis with Ukraine, the EBRD development bank forecast on Thursday after slashing its prediction for growth.

Ukraine’s economy will meanwhile contract faster than expected, in turn weighing on other emerging economies in the region, the European Bank for Reconstruction and Development said in its latest outlook report.

Russia’s economy will contract by 0.2 per cent in 2015, the EBRD said after predicting in May that it would expand by 0.6 per cent next year, reports AFP.

The bank, founded in 1991 to help ex-Soviet bloc countries such as Russia and Ukraine make the transition to free-market economies and democracy, maintained its forecast of zero Russian growth for this year.

“The Russian economy will come under pressure both from Western sanctions and the sanctions that Moscow has imposed on the West in response,” the EBRD said.

The United States and European Union last week hit Russia with tough new sanctions over Moscow’s “unacceptable behaviour” in Ukraine.

In some of the toughest measures yet to punish the Kremlin for allegedly fomenting the insurgency, Washington targeted Russia’s top bank Sberbank— which holds the deposits of nearly half all Russian savers—and leading energy and technology companies.

Moscow has meanwhile threatened to bar EU airlines from its airspace, and has drawn up a list targeting imports of consumer goods and second-hand cars from the West.

The EBRD added that Ukraine’s economy is predicted to shrink by 9.0 per cent this year, more than May’s forecast for a contraction of 7.0 per cent. Gross Domestic Product is set to come in at minus 3.0 per cent in 2015, the London-based institution added.