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Russia's Economics ministry downgrades 2015 oil price forecast to $80 per barrel

December 02, 2014, 14:06 UTC+3
As well as the oil price, Russia's Deputy Economic Development Minister touched upon the inflation, capital outflow and budget losses forecasts for 2015 amid worsening macroeconomic conditions
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© ITAR-TASS/Alexander Ryumin

MOSCOW, December 1. /TASS/. Russia’s Economic Development Ministry has downgraded its 2015 oil price forecast to 80 dollars per barrel and this year’s average — to 99 dollars per barrel, Deputy Economic Development Minister Aleksey Vedev told the media on Tuesday.

“The expected average price of oil next year has been down to 80 dollars per barrel from 100 dollars,” he said. “Since the oil prices are on the decline now, the 2014 price of the Urals blend should be lowered to 99 dollars from the originally expected average of 104 dollars.”

Inflation outlook

According to Alexey Vedev, Russia’s Economic Development Ministry has raised its annual inflation forecast for 2014 to 9.0% from 7.5% projected earlier.

The devaluation of the ruble will contribute 2.4% to inflation growth this year, he said, adding that the average inflation growth will reach 7.6% this year against 7.4% projected earlier.

The ministry expects inflation growth to slow down in December due to possible stabilization of the ruble rate at the current levels and lower consumption. “We expect inflation below 1% in December,” Vedev said.

As for 2015, the ministry raised its inflation forecast to 7.5% from 5.5%. Annual inflation is projected at 9.4% in 2015.

The ministry also does not expect inflation to exceed 10% in annual terms in January-March 2015, he said, adding that the ruble’s devaluation will contribute 4.0%-4.5% to inflation growth in the period.

Capital outflow forecast

Russia’s Economic Development Ministry has increased its forecast for net private capital outflow in 2015 to $90 billion from $50 billion projected earlier, Deputy Economic Development Minister said.

“A sharp decrease in oil prices led to a decline in the ruble rate and higher capital outflow. This year, we expect (net private capital) outflow at $125 billion (against $100 billion expected earlier). Our estimate for 2015 was raised to $90 billion from $50 billion,” Vedev said.

The ministry also revised up its forecast for the 2015 annual average exchange rate to 49 rubles per US dollar from 37.7 rubles earlier. The annual average exchange rate for 2014 was increased to 37.4 rubles from 35.7 rubles earlier.

The real effective ruble rate will fall by 6.8% in 2014 and by 13.5% in 2015, Vedev said.

Budget losses forecast

The Russian budget losses in 2015 may total 50-90 billion rubles ($1-1.7 billion) due to the worsening macroeconomic conditions, Alexey Vedev said.

He said these assessment was based on the forecasted exchange rate of 49 rubles per dollar and average oil price at 80 dollars per barrel.

Russia's GDP in 2015

Russia’s Economic Development Ministry expects a 0.8% fall of the GDP next year in contrast to the original expectation of a 1.2 growth, according to Vedev.

“We have revised this year’s GDP forecast to a 0.6% growth against 0.5% growth in the previous forecast. Also, we considerably reconsidered the GDP forecast for next year — the current version is based on the assumption of a 0.8% fall,” Vedev said.

He blamed the revision on continuing sanctions and investor uncertainty.

Sanctions against Russia

As far as western sanctions imposed on Russia in connection with crisis in Ukraine, the ministry expects them to last through 2015 Vedev said.

He said the ministry had earlier forecasted that sanctions would be lifted in mid-2015.

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