MOSCOW, December 25. /TASS/. Russian Economic Development Minister Alexey Ulyukayev said Thursday the Russian Central Bank’s key rate should be lowered in the first quarter of 2015.
“I believe the rate is at an extremely high level, and it needs to be cut within the first quarter of 2015,” Ulyukayev told journalists.
He said “for a quarter, banks still have an opportunity to maintain previous rates on loans or ones close to them.”
The Russian Central Bank’s board of directors decided overnight into December 16 to raise the key rate by 6.5 percentage points — from 10.5 to 17% annual interest. The bank’s decision was a response to a sharp ruble rate fall in the first half of December, the biggest in the past 15 years.
The last raise of the Russian Central Bank’s key rate became the sixth one since the year start. On March 3, the bank raised it from 5.5 to 7%, on April 25, to 7.5%, on July 25, to 8%, on October 31, to 9.5% and on December 11 to 10.5%.
Oil price and ruble
According to the minister, if next year’s oil price averages $60 per barrel, Russia’s budget deficit will reach two trillion rubles, the economic slump will reach 3%.
“It turns out that the income gap will be approximately 1.5 trillion rubles. Indexations-related extra spending will be some 400-500 billion,” he said. The fiscal gap is estimated 2 trillion, not 4 trillion.”
Earlier, the daily Kommersant quoted sources as saying that according to the Finance Ministry’s macroeconomic forecast, if crude next year trades at $60 per barrel (with chances of eventual growth to 70 dpb in 2017) Russia will see a 4% slump in 2015 to be followed by a 2.4% upward correction and eventual growth by 1.6%. Next year’s budget losses are estimated at about four trillion.
A conference at Prime Minister Dmitry Medvedev’s office behind closed doors discussed the first effects of the oil price slump on the federal budget. Kommersant says Finance Minister Anton Siluanov presented the Finance Ministry’s initial calculations regarding the necessary budget correction for 2015-2017 in the wake of the shrinkage in oil and gas revenues and the ruble’s devaluation.
The Finance Ministry’s main proposals for 2015 include an increase of the budget’s deficit to 3.5% of the GDP, indexation of social and regional spending by 0.5 trillion roubles and spending of more than 70% of the current amounts of the Reserve Fund.