Russia in for recession, high inflation even if oil rebounds to $80-$90 – RenCap
MOSCOW. Jan 21 (Interfax) – The Russian economy will not see any growth and inflation will remain high in 2015 even if oil prices rebound to $80-$90 per barrel, economists at Renaissance Capital believe.
At an oil price of about $60, which is the investment bank’s baseline scenario, Russia’s GDP will contract by 4.3% in 2015 and average annual inflation will accelerate to 12.6%, the bank said in a report.
The Russian economy might grow by 1% and average annual inflation might slow to 9.8% only if oil prices return to $100, the report states.
“According to our estimates, the Russian economy might show growth only if oil prices rise above $93 per barrel. However, we believe that such a development is unlikely at the moment,” the report states.
Forecasts for the ruble are also not very comforting. The Renaissance Capital analysts expect an exchange rate of 56.40 rubles/$1 at an oil price of $60, but if oil prices rebound to $80-$90 the ruble has a chance of strengthening to 50.20 rubles/$1 and 47.40 rubles/$1 respectively.
Although the analysts believe that the economic slump in Russia in 2015 will not be as dramatic as in 2009, when GDP fell by 7.8%, they also do not expect a strong recovery in 2016 like in 2010. Russia’s GDP will shrink by 7.2% in 2015 only if the oil price will be $40, they expect.
The analysts believe that Russia’s budget will no longer have a surplus in 2015, but expect that the deficit will probably not exceed 2% of GDP due to spending cuts.
Forecasts for Russian economy in 2015 at various oil prices:
Brent oil price, USD/barrel | 100 | 90 | 80 | 70 | 60* | 50 | 40 | 30 |
GDP growth | 1.0% | -0.4% | -1.7% | -3.1% | -4.3% | -5.8% | -7.2% | -8.7% |
Avg annual exchange rate | 45.1 RUB/$1 | 47.4 RUB/$1 | 50.2 RUB/$1 | 53.2 RUB/$1 | 56.4 RUB/$1 | 59.1 RUB/$1 | 72.3 RUB/$1 | 87.2 RUB/$1 |
Avg annual inflation | 9.8% | 10.4% | 11.2% | 12.1% | 12.6% | 12.0% | 13.1% | 13.5% |
Current account surplus, USD bln | 83 | 75 | 68 | 60 | 53 | 46 | 70 | 85 |
% of GDP | 4.7% | 4.5% | 4.3% | 4.1% | 3.8% | 3.6% | 6.7% | 9.9% |
Foreign debt, USD bln | 550 | 542 | 534 | 526 | 519 | 513 | 492 | 475 |
% of GDP | 31% | 32% | 34% | 36% | 38% | 40% | 47% | 55% |
Forex & gold reserves, USD bln | 365 | 360 | 355 | 350 | 345 | 340 | 330 | 320 |
* baseline scenario