MOSCOW, February 3. /TASS/. Recession in the Russian economy will continue, the Bank of Russia said on Wednesday.
"Industrial production statistics for December 2015 shows that production decline continues on the whole across main kinds of economic activity. This evidences concerns that the decline in the Russian economy will last longer than assumed earlier. The primary reason is the decline in oil prices in the coming months," the regulator said.
"Macrostatistic data received in the late month confirms the assumption we made in January regarding higher probability of continued recession in the first half of 2016," the Bank of Russia said.
According to the Central Bank, Russia’s budget deficit amid $35 per barrel oil price will grow to 4.8% of GDP.
"Implementation of base case forecasted scenario [implying average oil price in 2016 at $35 per barrel — TASS} results in lost federal budget revenues versus 1.45 trillion rubles outlined by the legislation and raises deficit from 3% to 4.8% of GDP," the report said.
Also, targeting deficit of 3% of GDP without raising debt burden necessitates a respective spending reduction by almost 9% of 16.1 trillion rubles outlined by the legislation, the report said.
Earlier the Finance Ministry has repeatedly said Russia’s budget deficit will not exceed 3% in 2016. The current budget for 2016 implies $50 per barrel oil price.
According to the Bank of Russia, negative economic trends "should serve as a base for refusal to additionally increase retirement payments using existing reserves." Russia’s retirement payments have been increased starting from February while the government planned to take a decision regarding another indexation according to the results of economic development in the first half of the year.
Oil prices may stay at the level of $20-40 per barrel for a long time, the Bank of Russia reported.
"Many commodities and indexes, including oil, again showed the lowest long-term price minimums, while the oil prices may stay within the range of $20-40 per barrel for a long time," the regulator said.
The demand for oil and oil products in China and the ability of oil producing nations to agree upon the production cut will be main factors forming oil prices, the Central Bank said.
The Central Bank at the same time does not expect OPEC members will agree upon the production cut. "The probability of such an agreement is low for the time being," the regulator said.
Brent oil futures are currently traded at $33.96 on the London’s ICE.