UPDATE: Econ ministry raises 2017 GDP growth forecast to 2.1%

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MOSCOW, Aug 31 (PRIME) -- The Economic Development Ministry has improved its forecast for the growth of Russia’s gross domestic product (GDP) in 2017 to 2.1% from 2%, Minister Maxim Oreshkin said on Thursday presenting the adjusted economic development forecast of the ministry.

“We have revised the GDP growth estimate for 2017 and improved it to 2.1%,” he said.

The ministry also raised its GDP increase estimates for 2018 to 2.1%, for 2019 to 2.2%, and for 2020 to 2.3% from 1.5% previously expected in all the three years. Oreshkin said that the new estimates are based on an expected increase in investment activity.

The GDP dynamics will return to the growth trajectory in August–September after a slowdown to 1.5% in July from 2.9% in June in annual terms, Oreshkin said.

The ministry raised its forecast for the investment increase in Russia to 4.1% in 2017 from 2% expected earlier, to 4.7% in 2018 from 2.2%, to 5.6% in 2019 from 2.0%, and to 5.7% in 2020 from 2.1%.

The forecast for the industrial output growth was kept unchanged at 2% in 2017 and improved to 2.5% per year in 2018–2020 from 2.1%.

The budget deficit may amount to about 2% of GDP or lower in 2017, but it will narrow to 0.8% of GDP in 2020, Oreshkin said.

The ministry also worsened its forecast for Russia’s net private capital outflow in 2017 to U.S. $18 billion and improved the figure for 2018 to $7 billion. Previously, the ministry expected the outflow of about $8–10 billion per year in 2017–2018.

OIL PRICE, RUBLE

The average annual oil price of the Urals oil blend, Russia’s key exports commodity, is now expected at $49 in 2017, up from $45.6 seen before. The price for 2018 was also improved to $43.8 per barrel from $40.8, while estimates for 2019 and 2020 were maintained at $41.6 and $42.4, respectively.

The minister said that oil prices may remain stable until the end of the first quarter of 2018, when the oil production cut deal of OPEC and non-OPEC states expire, and then fall to $41–42 per barrel by mid-2018.

The ministry also adjusted its estimates of the ruble exchange rate against the U.S. dollar, and the ruble may stand at 63 per U.S. dollar as of the end of 2017, up from 68 rubles expected before, with the average annual rate of 59.7 rubles in the year against the previous estimate of 64.4 rubles.

In 2018, the average annual rate will stand at 64.7 rubles per dollar, not at 69.8 rubles. The figures for 2019 and 2020 were also revised to 66.9 rubles from 71.2 rubles and to 68 rubles from 72.7 rubles, respectively.

Oreshkin said that the current rate of the ruble of about 58.5 rubles per dollar is close to its fundamental value and it may weaken only by about 1 or 2 rubles against the U.S. dollar until the end of 2017.

FEDERAL TRADE

The ministry sees the current account surplus of Russia to fall from $26.8 billion as of the end of 2017 to $7.1 billion rubles in 2018 and to $1.5 billion in 2019–2020. Previously, the ministry expected the surplus to stand at $26 billion in 2017, as $10.5 in 2018, at $5.8 billion in 2019 and at $5.6 billion in 2020.

The foreign trade surplus will reach $109 billion in 2017, as Russia’s exports will amount to $337 billion including $153 billion of oil and gas exports, while imports will reach $228 billion. The surplus for 2018 may amount to $90 billion with exports of $325 billion imports of $235 billion, and in 2019 it will fall further to $86 billion as exports will stand at $324 billion and imports will reach $238 billion.

As for 2020, the ministry sees the trade surplus rising to $91 billion as exports will reach $332 billion and imports are to stand at $241 billion.

ECONOMIC FACTORS

Real disposable incomes of Russian citizens will grow 1.2% in 2017, up from previously expected 1%, and for the next three years estimates were revised to 2.1% from 1.5% in 2018, to 1.1% from 1.2% in 2019, and to 1.2% from 1.1% in 2020.

The unemployment forecasts were kept at 5.2% for 2017, at 5.0% for 2018, and at 4.9% for 2019, while the estimate for 2020 was improved to 4.7% from 4.9%.

Retail sales in 2017 will grow only 1.2% against an expected increase of 1.9%, but forecasts for other years were raised to 2.9% from 2.6% in 2018, to 2.7% from 2.5% in 2019, and to 2.5% from 2.4% in 2020.

The ministry assumes that the West will maintain its anti-Russian sanctions for the whole period of the forecast until 2020, but Oreshkin said that the ministry expects no further expansion of the sanctions.

The baseline forecast also includes no changes in Russia’s taxation system, but the target leaves room for slight changes. Currently, officials are discussing possible options, he said.

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