The Central Bank of Russia does not consider rising oil prices an optimistic scenario

The Central Bank of the Russian Federation has developed three forecast scenarios for the development of the Russian economy, based on price levels of 40, 25 and 55 dollars per barrel of oil. Chairman of the Central Bank of the Russian Federation Elvira Nabiullina spoke about this today in the State Duma.

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The base scenario envisages maintaining oil prices at $40 per barrel.

“The growth rate of the Russian economy will gradually increase, but will remain low - up to 1% next year, and then 1,5-2% for the next two years. Inflation will be at 4%. Imports will gradually recover along with the revival of domestic demand,” Nabiullina said.

The risk scenario envisages an oil price of $25 per barrel. Nabiullina specifically noted that she considers the likelihood of such a scenario low.

“In this scenario, the decline in GDP will continue in 2017-2018, but will be small. Inflation of 4% will only become possible by 2018. The Central Bank has a whole range of tools to maintain both price and financial stability, even in the face of a negative scenario,” Nabiullina said.

At the same time, the banker does not consider the scenario of rising oil prices (up to $55 per barrel in 2019) to be optimistic. In this scenario, economic growth will begin earlier, but in the future the rate of economic growth will not significantly exceed the value of the base scenario.

“According to our estimates, even with rising oil prices after 2019, economic growth rates will stabilize at 1,5-2%,” Nabiullina said.

She drew attention to the fact that rising oil prices “will not cure the internal problems of our economy, but can create the illusion of quickly returning prosperity.”

“In this situation, it is impossible not to change anything and continue to build a life on the export of hydrocarbons. This scenario, in which we will quickly go through an unpleasant period, may result in stagnation with low growth rates and an increasing gap with developed countries,” Nabiullina said.