VEB sees Russian GDP rising 0.8% in 2017 if Urals oil at $51

MOSCOW, May 3 (PRIME) -- Russian state development bank Vnesheconombank expects the country’s gross domestic product (GDP) to rise 0.8% in 2017 if the average annual price for Urals oil amounts to U.S. $51 per barrel, VEB said in a forecast published on Wednesday.

The economic growth recovery is expected to happen due to improved household consumption and investment. Changes in reserves are also to make a positive impact on the GDP dynamics. The impact of net exports to the GDP will become negative thanks to the strengthening of the ruble and a 10.8% growth of imports, VEB said.

This, combined with the oil price, will result in the central bank gradually decreasing the key rate, but the reduction will not be significant even if inflation falls below the target level of 4%. There are also no reasons for a rapid plunge of the ruble’s exchange rate this year given the current level of oil prices and a moderate outflow of the net private capital, so the rate will remain within the range of 57–59 rubles per U.S. dollar, the bank said.

Improvement of producer confidence and a slight decrease of interest rate will result in restoration of fixed capital investment after a three-year fall. Investment will rise 2.2% in 2017. The general level of investment is to rise by about 2.2–2.3% per year in 2017–2020, partially because private investment will rise by 4.6–6.5% a year excluding investment in the oil industry and infrastructure.

But the situation on the labor market will gradually worsen. The number of people of an active working age will fall to 81 million in 2020 from 84 million people in 2016. The workforce productivity will rise due to structural factors and due to economic growth recovery, but it will not overweigh the contraction of the workforce of 0.5–0.8% per year in the period.

If the current pension system is maintained, the number of pensioners will grow to 45.7 million by 2020 from the current figure of 43 million, VEB said.

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