Russia's economy could show signs of recovery by the second half of 2016, assuming an average annual oil price of $40 per barrel, the Central Bank said.

The Central Bank of Russia said it was cutting its key interest rate by a half percent to 10.5 percent per year. The bank said growth in the economy was "imminent" with inflation moving toward the target rate of 4 percent by late 2017.

The rate cut is the first in nearly a year.

The Russian economy has been hobbled by the low price of oil and by Western economic sanctions imposed on Russia in response to its involvement in Ukraine and its annexation of Crimea in 2014.

In defending the rate cut, the bank said the worst of the downturn may be in the past as growth starts to take shape. Quarterly growth in gross domestic product is expected no later than the second half of the year. Growth of 1.6 percent in GDP is expected in 2017.

"The forecast is based on a fairly conservative estimate of the annual average oil price, which is approximately $40 per barrel over the three-year horizon," the bank said in its rationale statement.

Seasonal demand pressures and short-term supply outages pushed the price of oil this week above the $50 mark for the first time in nearly a year, though the last two sessions have been plagued by declines as some of the pressure from disruptions subsides.

The Kremlin in March warned a price above $50 per barrel might skew markets heavily toward the supply side as energy investors look to capitalize on the forward momentum for crude oil. In keeping the rate steady at the March meeting, Central Bank Gov. Elvira Nabiullina said the trajectory for oil, one of the main sources of revenue for Russia, was highly uncertain.

"The figures of the GDP dynamics in first quarter 2016 and macroeconomic indicators for April confirm greater sustainability of the Russian economy to oil price fluctuations," the bank said Friday. "Import substitution and non-commodity exports continue to expand and additional growth areas in manufacturing are taking shape."

Analysts with the World Bank downgraded the forecast for global economic growth for the year from 2.9 percent to 2.4 percent. Russia was singled out as one of the major economies expected to sink deeper into recession. The World Bank estimates Russia's economy will shrink by 1.6 percent GDP this year before recovery emerges in 2017.

The World Bank said downside risks for the economies of Europe and Central Asia remain because of Russian weakness. Russia, however, is one of the few major oil-based economies expected to produce more oil this year. According to the bank's report, the price of oil averages $41 per barrel this year and only holds above $50 by next year.