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Russia’s Central Bank improves forecast for net capital outflow in 2017

December 16, 2016, 20:02 UTC+3
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MOSCOW, December 16. /TASS/. Russia’s Central Bank has improved its forecast for net capital outflow from private sector in 2017 under the baseline scenario to $13 bln from $18 bln, the regulator said in a report on its monetary policy.

"It is expected that the net outflow of private capital in the 2017-2019 will remain at a low level. This will happen partially thanks to the level of interest rates, which ensures attractiveness of investments in ruble-denominated financial assets,"’ the document said.

The baseline outlook on capital outflow for 2016 was increased from $14 billion to $18 bln. In addition, the baseline forecast for 2018 dropped to $22 billion from $25 billion, and in 2019 - down to $21 billion from $25 billion (as it was in September forecast).

Russia’s Central Bank expects the US Federal Reserve System to raise base interest rate two-three times in 2017, the regulator said in a report on monetary policy.

"The decision to raise the interest rate by 25 basis points - up to 0.5-0.75% - was made at the meeting on December 14. It is expected that there will be two or three rate hikes in 2017," the document says.

The regulator noted that in the US and Eurozone some acceleration in inflation was observed in autumn of 2016, also amid a relatively soft monetary policy of central banks.

In the US it was accompanied by a rise in inflation expectations due to the increased probability of a noticeable easing of fiscal policy in the short term. In such conditions forecasts of market participants shifted significantly towards higher probability of early normalization of the monetary policy of the US Federal Reserve.

Oil price forecast

Russia’s Central Bank has kept the price of Urals, Russian export oil blend, at $40 per barrel for a three year period, the regulator said in the report.

"The Bank of Russia kept conservative approach regarding Urals price at the level of $40 per barrel," the document said.

The regulator also kept its forecast on oil price in the risk scenario: Urals oil will cost more than$25 until 2019.

According to the regulator, there is still probability that oil price may fall from its current level to $40 per barrel in 2017-2019.

"At the same time the Bank of Russia does not rule out that the situation on the oil market may be more favorable," the report said.

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