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World Bank predicts investments in Russia’s fixed assets to surge to 2% in 2017

May 23, 14:16 UTC+3 MOSCOW

World bank explains the growth by macro stabilization, improved investors’ sentiment and a stronger ruble

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© Sergei Konkov/TASS

MOSCOW, May 23. /TASS/. The World Bank predicts investments in Russian fixed assets will increase to levels of 2% in 2017, the report by the international organization states.

"We expect growth in fixed capital investment to pick up in 2017 to 2.0% due to macro stabilization, improved investor sentiment and a stronger ruble. Together, these factors could help companies realize some deferred demand for equipment," the report said.

"Given the massive inventory destocking in 2015 and a recovering economy, we expect businesses to renew their stocks in 2017, boosting import growth to 10% YOY and providing support to some manufacturing sectors," the report said.

"The 2018 World Cup could further strengthen public investment. Fixed capital investment growth is expected to accelerate to 2.5% and 3.5% in 2018 and 2019 respectively, as economic policy uncertainty subsides and external demand further improves," according to the World Bank.

Average oil price in 2017 to reach $55 per barrel

The World Bank retains its forecast for average oil price in 2017 at the level of $55 per barrel, according to the organization’s report.

"Crude oil prices remain projected to average $55/bbl in 2017, an increase of 29% from last year, and $60/bbl and $61.5/bbl in 2018 and 2019 respectively," the report said.

According to the World Bank, the oil price increase in 2017 reflects rising oil demand and falling stocks and assumes an extension of the OPEC/non-OPEC agreement. Prices are projected to increase to $60/bbl in 2018 as the market regains balance, with shale production limiting larger price gains.

At the same time, the organization noted that there are significant risks to the oil price forecast. On the upside, stronger demand and greater compliance by OPEC/non-OPEC producers could accelerate rebalancing, as could supply outages among major exporters (e.g., Libya, Nigeria, and Venezuela).

"OPEC policy decisions to expand production cuts could also support higher prices, as could rising production costs. Downside price risks include weaker compliance with the OPEC agreement. Rising output from Libya and Nigeria could delay rebalancing, as could slower demand growth. A faster-than-expected rise in U.S. shale oil production - from further efficiency gains and increased profitability stemming from potentially lower taxes - could also affect the supply balance," the World Bank said.

Moderate growth of Russia’s economy

Russia’s economy is expected to expand moderately over the next three-year period, with growth rates are seen at 1.3% and 1.4%, according to the World Bank’s report.

"We expect the Russian economy to grow 1.3% in 2017 and 1.4% both in 2018 and 2019. The positive terms-of-trade effect from rising oil prices, coupled with more stable macroeconomic conditions, are expected to drive this recovery," the World Bank said.

According to the report, a moderate recovery of the global economy is expected for 2017, on the back of continued solid growth by commodity importers and a pickup in commodity exporters during the year.

Nevertheless, the expected recovery in commodity exporters will be weaker than expected, reflecting longer-than-expected adjustments to low commodity prices in some countries. China’s slowdown is expected to weigh down on commodity importers’ acceleration. In 2018-19, its growth is expected to strengthen to 2.9%, the report said.

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