Russia in for recession, high inflation even if oil rebounds to $80-$90 – RenCap

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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

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