World Economy

Russia Forecasts Inflation Near 6%

Russia Forecasts Inflation Near 6%Russia Forecasts Inflation Near 6%

Russia’s Foreign Ministry forecasts inflation at 5.5-6% in 2016, Deputy Finance Minister Maxim Oreshkin told journalists on Monday.

“This is how it is going now. We do not see serious restrictions for the central bank not to reach 4% target at the end of 2017,” he said.

The finance ministry does not rule out a small deflation in August, Oreshkin said and added, “There could be a small deflation,” Tass reported.

It was reported earlier that the Russian Central Bank believed deflation could take place in Russia in August-September in view of some seasonal factors.

“Deflation is possible early in fall, at the turn of August. However, food prices declined this year earlier than usual and some seasonality may be shifted. We have not changed the inflation outlook by the yearend so far—5-6%,” the Central Bank Governor Elvira Nabiullina said.

Money from the reserve fund will not be used in July 2016 but towards the end of the year, Oreshkin said. “Closer to the end of the year we will start the projects that were planned,” he said.

According to him, this trend will not affect the exchange rate of the ruble.

According to Oreshkin, the finance ministry sees no direct impact of ruble strengthening on the budget. The current exchange rate of the ruble is fully consistent with the balance of payments and oil prices, he said.

Oreshkin said he does not agree with the experts’ assessments, according to which the strengthening of the ruble exchange rate by one ruble leads to budget losses of around 150-160 billion rubles ($2.3 billion-$2.46 billion).

The deputy finance minister went on to say that the growth dynamics of GDP and industrial production of Russia in the second half of 2016 will be higher than in the first half of the year.

“I cannot give you specific numbers, but GDP will be more than in the first half of the year.”

A considerable number of Russian banks already have liquidity surplus, Oreshkin said.

He said that the finance ministry expects the outflow of capital from Russia to increase in the second half of 2016 due to an intensive schedule of debt repayment.

“We expect that in the second half of the year the capital outflow will be a bit higher due to the heavier schedule of repayment of external debt, but again, there won’t be any significant changes,” he said.