Greece-eurozone crisis to result in recession in Russia.

By bne IntelliNews May 24, 2012
On the background of CBR's and FinMin's efforts of the past two weeks to calm the concerns over eurozone instability's potential dangers for Russian economy, the effect of possible expulsion of Greece from the eurozone is discussed by the press. RIA Novosti cites Sberbank's analyst Andrey Sinyakov, estimating that Greek eurozone crisis would lead to a 2% GDP decline in Russia, net capital outflow speeding up to USD 100bn and RUB weakening. At the same time Sinyakov believed that a scenario of maintaining eurozone in its present form seems unlikely. Reuters reports the simulation by Bank of America - Merrill Lynch, which predicts oil prices dropping to USD 60 per barrel in case of a "Grexit", which for Russia would result in a budget deficit, fast exhaustion of freshly-recovered National Reserve Fund, RUB devaluation, lower investment and exports and eventually a 1% GDP decline. Second scenario sees per barrel oil price at USD 80 resulting in GDP growth of 1.5%, while maintaining status quo would leave the USD 100 oil price, BA-ML believes. Last week Deputy FinMin Sergei Storchak told the press that the ministry is not alarmed by weakening oil prices and depreciating RUB. Last week oil price declined to about USD 107 per barrel, while RUB rate weakened to a four-month low after posting upwards dynamics in the beginning of 2012. Storchak agreed that RUB rate decline is due to the global political rather than macro environment. Deputy FinMin also reminded that current budget is drafted at a USD 100 per barrel oil price and believed that current oil price is not something to be worried about.

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