WB Optimistic About Russia Growth

Russia’s oil-dependent economy is expected to grow from 2017 onwards, supported by higher global crude prices and oil production rising to new post-Soviet highs, the World Bank said on Tuesday.

The international lender said it expected Russian gross domestic product to grow by 1.3% in 2017 and by 1.4% in 2018 and 2019, following two years of economic contraction, Reuters reported.

Greater oil earnings would “positively influence consumer and investor sentiment, leading to a recovery of domestic demand and modest economic growth in 2017-19,” the World Bank said in a semi-annual report.

It said its latest growth forecasts were based on the assumption that crude prices would average $55 a barrel this year, $60 in 2018 and $61.5 in 2019, and that an OPEC/non-OPEC agreement to restrict output was extended.

It cited International Energy Agency data as forecasting that Russia’s oil output would rise to 11.38 million barrels per day this year and 11.54 million bpd next year, due to rising production by small- and medium-size energy companies.

The World Bank said rising consumption and a recovery in investment activity would drive Russia’s economic growth, citing the 2018 soccer World Cup that Russia is set to host as giving a potential boost to public investment.

Inflation is forecast to stabilize near the central bank’s target of 4%, but Russia’s longer-term growth prospects are constrained by low productivity, it added.

In November the World Bank forecast the Russian economy would grow 1.5% this year.

Growing macro-stability, driven by the government’s policy response package of a flexible exchange rate policy, expenditure cuts, and bank recapitalization–along with tapping into the Reserve Fund–has helped facilitate the adjustment of an economy hit by the double shocks of low oil prices and restricted access to international financial markets.