MOSCOW, December 23. /TASS/. Low oil prices jeopardize balance of the Russian budget, the Bank of Russia said on Wednesday.
"Low oil prices pose a risk to Russia and other exporter nations from the standpoint of the budget balance," the regulator said.
Russia is currently characterized by low ratio of the total government debt and the GDP (13.6% of the GDP as of July 1, 2015, the Central Bank said. However, quick spending rate of the Reserve Fund to compensate the budget deficit triggers concerns. "There is a need to limit expenditures and the budget deficit level in mid-term for the purpose of supporting budget stability and lowering the inflation pressure," the Bank of Russia said.
According to the regulator, oil prices are highly likely to remain at low levels in the mid-term.
"Commodity prices will most likely remain low in the mid-term period," the regulator said.
According to the Bank of Russia, slowdown of China’s economy, the main consumer of this resource, will primarily affect oil prices.
The Central Bank forecasts the average oil prices will be $50 a barrel in 2016.
Dollar will continue strengthening against the background of further rate increase by US Federal Reserve, the Bank of Russia said.
"Further growth of the Federal Reserve rate will be accompanied by US Dollar strengthening," the regulator said. Contraction of credit dollar mass for the purpose of toughening the Federal Reserve’s monetary policy may influence on commodity prices, the Bank of Russia said.
According to regulator’s assessment, cost of borrowings in US dollars will grow in different segments of the financial market along with higher demand for dollar liquidity after the increase of the Federal Reserve rate in December 2015. The Central Bank expects assets price correction and sales of assets on the local markets.
According to the regulator. weaker ruble does not lead to growing dollarization of deposits and loans within Russia.
"Despite ruble weakening by 15% from April 1 to October 1, 2015, growth of dollarization level of loans and deposits is not observed in the banking sector," the regulator said.
Dollarization level of all deposits in nominal value grew by not more than 2.7 percentage points and dollarization of loans rose by 2.5 percentage point, the Bank of Russia added.
Russia looks more stable than many other countries against the backdrop of global economic challenges, such as normalization of the US monetary policy (the raise of Federal funds rate) and slower growth of the Chinese economy, Russia’s Central Bank said in its financial stability review.
"In comparison with other emerging markets, Russia's positions look quite stable due to the presence of sufficient foreign exchange reserves, the ongoing reduction of leverage in private sector, fiscal sustainability [compared with other countries — oil exporters]," the regulator said.
According to the document, currently, the global economy is affected by two main factors — the continuing normalization of monetary policy of major central banks, especially the US Federal Reserve (Fed) and the structural transformation of China's economy which is accompanies by a slowdown in the economic growth. In such circumstances, forecast of global economic growth remain moderate, while the risks of instability on global financial markets are more pronounced.
Earlier head of the Central Bank Elvira Nabiullina said that financial markets have already taken into account the raise of the Federal funds rate. The Central Bank does not rule out an increased volatility on global markets after the actions of the US Federal Reserve, which will put pressure primarily on the currencies of developing countries.
The next decision on the US Federal Reserve on Federal fund rate is expected on January 27.