Russian economy forecast to return to health over next three years

Russian economy forecast to return to health over next three years
Russian economy to return to growth in 2017, albeit anemic .
By bne IntelliNews August 31, 2016

Russia’s Ministry of Economic Development released its economic forecast for the next three years that shows a return to economic health from 2017, albeit at anemic growth rates.

The ministry offered two scenarios, basic and plus, the main difference being the predicted price of oil. It also included projects based on actual economic results from April.

In the basic scenario, oil prices are assumed to remain at an average of $40 for the next three years, whereas in the plus scenario oil prices will rise to $55 by 2019.

In terms of growth there is little difference between the two outlooks, with growth remaining under 3% in both and a few tenths of a percentage point between them: Russia will be growing at best by 2.4% in 2019 under the plus scenario.

The other key parameter being watched is inflation: the Central Bank of Russia (CBR) is working hard to get inflation down to its target of 4% as part of a broader plan to reduce the cost of capital and so engender investment driven growth. In both scenarios this target will only be hit in 2019, but with inflation predicted to fall to under 5% in both cases from the current 7.1%, presumably investment could start rising dramatically from next year.

And while the difference between the scenarios is not great, the affect on the dollar value of the Russia economy is more noticeable. Russia’s economy is worth circa $1.2 trillion today, down from a pre-crisis peak of $2.1 trillion in 2013. Under the basic scenario that value will grow to $1.5 trillion in 2019 and to $1.72 trillion in the plus version.

 

MED 3 year forecast
  2016 2017 2018 2019
  April basic plus April basic plus April basic plus April basic plus
Avg oil, $/bbl 40 41 41 45 40 50 40 40 55 40 40 55
GDP -0.2 -0.6 -0.6 0.8 0.6 1.1 1.8 1.7 2.1 2.2 2.1 2.4
CPI (eop) 6.5 5.8 5.8 4.9 4.9 4.6 4.5 4.4 4.2 4 4.1 3.9
RUB/$ eop 67.2 67 67 64.8 65 61.1 64.1 64.6 59 62.7 64.1 58.7
Nominal GDP RUB bn 84.3 82.8 82.8 89.5 87.1 88.6 95.4 92.4 95 101.4 98.3 101.2
Dollar GDP equivlaent $ trillion 1.25 1.24 1.24 1.38 1.34 1.45 1.49 1.43 1.61 1.62 1.53 1.72
source: Ministry of Economic Development                       

Data

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