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Research says decline of Russia's GDP by late 2015 could reach 4.2%

November 12, 2015, 11:43 UTC+3
The Research Department of the Russian Central Bank stressed its conclusions and recommendations do not necessarily reflect the official position of the Russian Central Bank
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© Alexandr Ryumin/TASS

MOSCOW, November 12. /TASS/. The decline of Russia's GDP by the end of 2015 could reach 4.2%, according the Research Department of the Russian Central Bank report published Thursday.

According to the document, its conclusions and recommendations do not necessarily reflect the official position of the Russian Central Bank.

"Our model GDP forecast for 2015 slightly improved - to -4.2% (-4.3% in September), the forecast for the last 12 months from the calculation date to the Q1 of 2016 is -4.5% at -4.6% last month. We continue to expect the resumption of growth not earlier than in the Q1 of 2016," the document says.

The document notes that the Russian economy is showing signs of stabilization, which are yet unstable.

Resumed oil price decline increases probability of risks to financial stability

The report says resumed decline of oil prices increases probability of risks to financial stability.

"Risks to financial stability declined in large but currently resumed oil prices drop increases the probability for new risks to emerge," the research department said.

Volatility on the oil market was higher in October as compared to September. Oil prices dropped below $53 a barrel early in October.

Lowest deceleration point of investment activity in Russia not yet passed

The lowest point of deceleration of investment activity has not yet passed, says the report. 

According to the document, its conclusions and recommendations do not necessarily reflect the official position of the Russian Central Bank.

"We believe that the lowest point of deceleration of investment activity has not yet passed ... According to our estimations, the monthly increase in investment in fixed capital (adjusted for seasonal factors in September) was negative at -0.4% (month-on-month), which does not yet show beginning of the hike of investment activity," the report said.

However the document said that year-on-year deceleration of decline in economic activity that started in June continues.

As for consumer spending, the report said that in September it continued to decline. Retail trade turnover decreased even more amid decline in real wages, continuing from mid-2014 (adjusted for moderate growth in times of adjusting public sector wages). Consumer confidence in the Q3 also deteriorated, according to preliminary estimates from the Russian Federal State Statistics Service (Rosstat).

"In our opinion, this is due to the weakening of the ruble and increase in volatility of the exchange rate dynamics due to lower oil prices in the previous quarter. The stabilization of the exchange rate dynamics in September and October should have a positive impact on consumer confidence, but at the moment we do not see any compelling fundamental prerequisites for termination of the decline in retail trade turnover," the report of the Russian Central Bank Research Department said.

High inflation expectations may serve as risk factor 

According to the report, high inflation expectations may serve as a risk factor for actual inflation to be above the official forecast of the Bank of Russia.

Inflation in Russia may be 12-13% in 2015 and 5.5-6.5% in 2016 according to the baseline forecast of the Central Bank.

"Inflation expectations still remain at a relatively high level, despite the outlined currency rate stabilization starting from mid-September. In our opinion, this may be the risk factor for actual inflation to be above the official outlook of the Bank of Russia in short term and mid-term," the research department said.

Inflation pressure and risks remained in Russia at a high level in October, the Bank of Russia said.

The Central Bank published results of a public opinion poll early in November, showing that inflation expectations of Russians for the next year declined in October 2015 after growth noted in summer and early fall.

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