MOSCOW: This year's economic contraction in Russia will be not as deep as previously expected and the central bank still sees limited room for a rate cut, its head of monetary policy, Kirill Tremasov, said on Thursday.

The central bank has slashed its key interest rate to a record low of 4.25% this year as the economy took a hit from the coronavirus pandemic and an associated crash in prices for oil, Russia's key export.

The economy will shrink by around 4% this year, Tremasov said. The most recent central bank forecast was for a drop of up to 5%.

"Potential for a further rate cut is there, we see it, but it's not that big," he said.

According to a consensus forecast of analysts polled by Reuters in late October, the bank is expected to keep the rate unchanged at its next board meeting on Dec. 18.

The cuts it has carried out in 2020 have already supported lending activity, Tremasov said, predicting that consumer lending will grow by 13-16% in 2021, the same pace as this year.

In its base scenario, the central bank does not take into account risks of a large-scale COVID-19 lockdown similar to the one that Russia imposed in the second quarter, he added.