Econ ministry raises Russia’s 2017 GDP growth forecast to 2%

MOSCOW, Apr 6 (PRIME) -- The Economic Development Ministry has improved its estimate of Russia’s gross domestic product (GDP) growth for 2017 to 2% in the baseline scenario from 0.6%, Minister Maxim Oreshkin said in a news conference on Thursday presenting the ministry’s adjustments to the macroeconomic forecast until 2020.

But outlook for 2018 and 2019 was worsened to 1.5% each year from 1.7% and 2.1%, respectively. The ministry also expects the GDP to grow 1.5% in 2020.

The ministry now sees 2017 budget deficit closer to 2% of GDP, but it will shrink to 1.5% if the current high oil prices maintain. The baseline scenario sees budget deficits of 1.7% of GDP in 2018, at 1.3% of GDP in 2019, and at 0.8% of GDP in 2020.

According to the estimates, budget revenue will reach 14.68 trillion rubles in 2017, 14.71 trillion rubles in 2018, 15.31 trillion rubles in 2019, and 15.98 trillion rubles in 2020. Spending is seen at 16.57 trillion rubles, 16.37 trillion rubles, 16.61 trillion rubles, and 16.85 trillion rubles, respectively.

The ministry also revised its estimates of the average annual oil price for the years. Previously, the price was seen at U.S. $40 per barrel, but now the ministry believes it will amount to $45.6 in 2017, $40.8 in 2018, $41.6 in 2019, and $42.4 in 2020.

Fhe forecast for the average annual rate of the ruble against the U.S. dollar was improved to 64.4 rubles from 67.5 rubles, while forecasts for the following years were worsened to 69.8 rubles from 68.7 rubles in 2018 and to 71.2 rubles from 71.1 rubles in 2019. The rate in 2020 is seen at 72.7 rubles.

The two pillars of the baseline forecast of the ministry are the non-prolongation of the oil production slash agreement of OPEC and non-OPEC countries and prolongation of Western sanctions against Russia until the end of 2020, the minister said.

MACROECONOMICS

The baseline expectations of industrial output growth in Russia was raised to 2% in 2017 from 1.1% and to 2.1% in 2018 from 1.7%, while the forecast for 2019 was maintained at 2.1%. In 2020, the ministry expects industrial output to rise by 2%, Oreshkin said.

Forecast investment in Russia was also improved to a 2% growth in 2017 from 0.5%, to a 2.2% increase in 2018 from 0.9%, and to a 2% raise in 2019 from 1.6%. The estimate for the increase of investments in 2020 is 2.1%.

Oreshkin also said that the projection for inflation in 2017 was slashed to 3.8% from 4%, while the estimate for the three following years stayed at 4%.

The baseline scenario sees inflation meeting the central bank’s target of 4% already in May. If the ruble weakens to 68 rubles per U.S. dollar, inflation may reach 3.8% in 2017, but if the current rate of 56–57 rubles is maintained, inflation may reach only 2.9% this year. Still, this is unlikely, as the central bank will take this possibility into account while deciding on the key rate and cut it faster, Oreshkin said.

SOCIAL FIGURES

The ministry also improved its expectations of the country’s unemployment to 5.2% from 5.9% in 2017, to 5% from 5.8% in 2018, and to 4.9% from 5.7% in 2019.

The retail trade turnover increase estimate was also upped to 1.9% from 0.6% this year, to 2.6% from 1.1% next year, and to 2.5% from 1.8% in 2019, Oreshkin said, adding that the figure may rise 2.4% in 2020.

Real disposable incomes may increase 1% in 2017, which is an improvement from 0.2% expected earlier, he said. The new macroeconomic forecast of the ministry also raised the estimates to 1.5% from 0.5% in 2018 and to 1.2% from 0.8% in 2019. It also set the estimate for the growth of real disposable income in 2020 at 1.1%.

Projections of Russians’ wages growth were also revised to 1.3% from 0.4% in 2017, to 2.7% from 2% in 2018, and to 1.3% from 1.6% in 2019, and for 2020 the figure was set at 1.3%.

(55.8940 rubles – U.S. $1)

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