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Central Bank head says low oil prices are not catastrophe for Russian economy

October 03, 8:58 UTC+3
The Central Bank's basic scenario is based on an oil price of $40 per barrel
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ANOSINO /Moscow region/, October 3. /TASS/. There will be no catastrophe in Russia’s economy if oil prices are low, governor of the Bank of Russia Elvira Nabiullina said on Sunday.

"Our calculations demonstrate that even if we have a scenario with low oil prices ($25 per barrel - TASS), naturally it will adversely impact economic growth dynamics, but there will be no catastrophe because our economy and the financial system, and the balance of payments have adjusted to such oil prices," she said.

According to Nabiullina, the Bank of Russia’s basic scenario is based on an oil price of $40 per barrel, as is the government’s forecast.

"This year, we expect further economic slowdown, but as big as last year. We expect a slowdown of 0.3-0.7% in the third quarter while a slight growth can be expected in the fourth quarter on the previous one," she said.

"Next year, according to our forecasts, we will see a slight economic growth of about one percent," she added. "The in next two year, the growth may reach 1.5-2%"

The optimistic scenario is based on an oil price of $55 per barrel. However the Bank of Russia governor said it’s better to rely on "more conservative approaches."

Oil prices [including Brent Oil, Russia’s key export commodity] depend on a number of market factors, such as oil output fixed by the biggest oil cartel - the Organization of the Petroleum Exporting Countries (OPEC); instability in the oil producing countries in the Middle East; economic performance and growth forecasts on the markets in the United States, Europe and China (the better the performance is the higher is demand for oil). Oil and gas exports account for about 50% of Russia’s federal budget revenues. Hence, falling oil prices cut incomes of oil exporters and ultimately entail a drop in the ruble exchange rate.

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