UPDATE: Econ min: Russia’s GDP unlikely to exceed 1.9% in Jul–Dec

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VLADIVOSTOK, Sep 12 (PRIME) -- Russia’s gross domestic product (GDP) is unlikely to exceed 1.9% due to increased uncertainty and volatility on financial markets, Economic Development Minister Maxim Oreshkin told reporters on the sidelines of the Eastern Economic Forum on Wednesday.

“We do not expect any large positive surprises in the third and the fourth quarters… It is linked with increased uncertainty, with rising volatility on the financial markets. All these factors are of course not the background which may accelerate growth,” Oreshkin said and also reiterated that the ministry expects a slower GPD growth rate in January–March 2019.

The ruble is not ruled out to strengthen to 63–64 rubles per U.S. dollar by the end of 2018, but the return to the fundamentally reasonable level can take longer, he said. “We have a forecast for the end of the year, and also for the coming 12 months. We see no reasons to adjust them so far. I do not remember the exact figure (for the end of 2018), but it is about 63–64 (rubles per dollar).”

The minister is sure that the ruble will begin strengthening after the current outflow of capital from the market stops. The equilibrium ruble rate at the present Brent oil price of U.S. $78 per barrel is around 50 ruble per U.S. dollar if the Finance Ministry makes no foreign currency purchases on the internal market.

Inflation can exceed the ministry’s forecast of 3.4% in 2018 in case the current ruble rate remains, he said. “The annual estimate will seriously depend on the currency exchange rate dynamics. If it stays at a level close to the current one, (inflation) will be higher than 3.4% projected earlier.”

The Economic Development Ministry has prepared a stress outlook on Russia’s economy under the conditions of sanctions against the government debt and the state banks to develop measures to resist the sanctions.

Higher volatility may persist during six to 12 months thanks to external factors, Oreshkin said and added that although the global crisis has already become a reality for some emerging economies, Russia has a significant strength reserve as its fundamental macroeconomic markers differ.

The minister added that the central bank is absolutely independent in its decisions, the government makes no pressure on it. “It is clear that there is nervousness which is connected with emerging markets. But the government does not interfere with the central bank’s decisions. The central bank is independent.”

Fresh U.S. sanctions will not impact Russia’s economy much if the Finance Ministry provides a system of lending on new conditions, Oreshkin said.

Now there is no need to require that exporters sell their foreign currency income as the market works properly, he added.

Actions of the U.S. aimed at raising economic protectionism will force Russia and other states to get rid of settlements in U.S. dollars and move to settlements in national currencies. Necessary infrastructure for the transfer will be created, he said and added that a wave of new trade duties poses a risk for global economic growth.

A number of companies besides RUSAL are interested in re-registration from foreign jurisdiction into Russia’s newly established special administrative regions which allow the companies to acquire a status of an international company, the minister said.

Mechanisms envisaged by the nation-scale projects may support companies which will invest in Russia’s infrastructure, and no additional aid is implied by the 2019-2021 budget.

Oreshkin also said that the government keeps in constant touch with aluminum producer UC RUSAL sanctioned by the U.S. in April concerning possible ways to support the company.

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