The World Bank on Monday said it saw some improvement in Russia's battered economy, predicting it would shrink by 2.7 percent this year and return to growth of 0.7 percent in 2016.

The Russian economy has been savaged by a fall in oil prices and Western sanctions imposed over the conflict in Ukraine, and the World Bank had previously forecast a contraction of 3.8 percent in 2015 and of 0.3 percent next year.

"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," Birgit Hansl, World Bank lead economist for Russia, said in a statement.

"That would allow Russia's central bank 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."

After plummeting dramatically between June 2014 and January, oil prices have rebounded to around $60 a barrel.

Russia's ruble currency crashed last year but since the start of 2015 has clawed back ground, leading officials to claim that the worst of the crisis is over.

The Russian central bank in December hiked rates dramatically as the currency fell but in recent months has been cutting back rates as inflation fears have eased.

The International Monetary Fund has also improved its outlook for Russia to a 3.4 percent contraction this year and growth of 0.2 percent in 2016.