Russian economy to overcome recession in four years, ministry says

Russian economy to overcome recession in four years, ministry says
Russian CPI y/y vs m/m
By bne IntelliNews March 31, 2016

The Russian Ministry of Economic Development has revised its macro forecast for 2016-2018 with a new vein of optimism and prepared an upbeat forecast for 2019, Vedomosti reported on March 31. 

The oil price is expected to remain in the range of $40-$50 per barrel, and the economy will emerge from recession in 2017 with oil at $45, according to the new outlook. The decline of major economic indicators - wages, real income, investment, industry - will stop around the same period, it says. 

The forecast prepared by the team of minister Alexei Ulyukayev suggests that the economy will shrink by 0.5% in 2015-2018. But in 2019, despite the stagnation of oil prices, the growth rate will accelerate to 2.5% and compensate for the losses, the ministry believes. The scale of economic recession in 2016 is reduced to a symbolic 0.3%.

Inflation will slow to 5% by the beginning of 2020, while the capital outflow will decrease to $20bn and the ruble will strengthen to RUB56.7 per dollar.

The ministry's forecast contrasts sharply with the bleak prognosis offered by Natalia Orlova, chief economist at Alfa Bank, who expects four-year stagnation. "The best the Russian economy can hope to achieve in this period is the potential growth rate of between 0.5% and 1%," Orlova told bne IntelliNews

The electoral period is usually marked by an increase in social spending, severely curtailed in 2016. The population's income will fall by more than 8% in 2015-2016, the ministry now expects. Growth of real incomes and real wages will resume in 2017, but at the beginning of 2020 the indicators will still remain below the 2014 level, at 5% and 7%, according to the revised forecast.

The economy will not be able to overcome the effects of a four-year decline of investments by 2020, but the ministry increased the expected speed of recovery by almost 1.5 times in 2018-2019 to almost 5%. 

While companies have the resources there is no certainty, and the government should give a signal that the situation stabilised, Ulyukayev said earlier. "Business is waiting for the signal that it is possible to invest again," he said.

The ministry's outlook will become the basis for the federal budget, but last year the customary three-year plan was first suspended because of instability of the oil market. With the gradual improvement of the oil market, Russian officials said recently the government will from 2016, resort to one-year budgeting again. It will also abandon the budget rule benchmark setting the average oil price for capping expenditure levels.

Data

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss