Higher oil price: will see faster growth says Russia
Oil to drive up Russia growth
Russia's economy is likely to grow faster than previously expected in coming years as higher oil prices speed up its return to pre-crisis levels, deputy economy minister Andrei Klepach told a banking conference in London today.
Gross domestic product could grow by 3.1% in 2010 against a previously forecast 1.6%, while 2011 could see an increase of 3.4%, Reuters quoted Klepach as saying.
The price of Urals oil - a key export for the resource-based economy - could average $65 to $71 per barrel over the next three years, against the $58 to $60 assumed in the current budget.
"We were (previously) quite conservative in terms of the oil price," Klepach said, adding that in his private opinion, the country might need to raise only $8 billion to $10 billion in Eurobonds next year, half of the official plan, if oil remained over $60 to $65 per barrel.
The Economy Ministry is due to submit revised forecasts for 2010 to 2012 to the Finance Ministry today.
Currently, Russia is expected to return to pre-crisis levels of GDP by the end of the three-year budget planning period in 2012.
The economy started to show first signs of recovery in the summer after slipping into recession in the second half of 2008 due to a slump in oil prices, investor flight from emerging markets and the global credit crunch.
Klepach forecast quarter-on-quarter growth of 2% in the final three months of this year.
Recent data underscores the fragility of the recovery, with the manufacturing sector PMI falling to a four-month low in November and officials have been careful not to call an end to the crisis.
"There are serious risks," Klepach said, adding that unemployment was rising and credit growth had fallen.
One tool for propping up growth has been interest rate cuts, with the refinancing rate slashed by 400 basis points since April to 9%.
New central bank data showed that banks' lending rates to non-financial sector organisations fell to 13-month lows in October, indicating rate cuts are being passed on to borrowers.
The central bank's first deputy chairman, Alexei Ulyukayev, said there is a chance of more monetary easing before the end of the year, as well as more steps in 2010.
"Inflation risks are low until the end of this year and in early 2010. Maybe some risks could come by the second half of 2010 depending on global conditions and how the economy reacts," he told the banking conference.
Analysts polled by Reuters had forecast that the refi rate will remain on hold at the current 9% in December, and cuts will only resume in 2010.
Ulyukayev reiterated that 2009 annual inflation will come in at around 9% or a little more, after a price rise of around 0.5% in December. In January, monthly inflation could be 1.5% or less, he added.
While the high oil prices have been a boon for the economy, they have also attracted speculative capital into Russia, sparking a rally in the rouble.
"We think the fast exchange-rate appreciation is worrying because it is worsening our competitiveness," Klepach said.
"We had planned for the rouble to return to pre-crisis levels in 2012 but in practice, in real effective terms, this will (happen) in the beginning of next year."
Authorities are now considering possible measures to discourage such inflows and make it less attractive for companies and banks to borrow abroad.
"It (such measures) will happen when the situation becomes alarming, worrisome, threatening to the market," Ulyukayev told reporters on the sidelines of the conference.
"For now, we will monitor, study how the situation is developing on the whole, for the banking sector, for the financial sector, for borrowers and so on."