Russia Says Economy Less Dependent on Oil

The Russian budget has adjusted to oil price swings, according to Finance Minister Anton Siluanov. The non-energy fiscal deficit has dropped, while the ruble has gained over 11% year-on-year, proving the resilience of the economy to low crude prices.

“We see the budget deficit, calculated without oil and gas revenues, has fallen. This shows the stability of our budget to various changes in the external economic environment,” Siluanov said, RT reported.

This indicator, he said, will decrease by 0.6 percentage points to 8.4% of GDP this year. “This is the lowest figure for the last nine years,” he added.

The Russian ruble remains one of the best-performing currencies over the last 52 weeks, gaining over 11% in a year. On Friday, the ruble was trading at 57 against the dollar and 63.64 against the euro. The Russian currency has remained stable despite a 10% drop in oil prices since May 25.

“The non-energy budget deficit should fall to at least 6% of GDP in the future,” the finance minister said. Russia’s overall fiscal deficit is set to be 2.1% of GDP this year, down from the original 3.2% forecast, according to Siluanov.

In 2016, oil, gas and other hydrocarbons accounted for 38% of the Russian budget. This year, it is likely to fall to 37%.

Russia’s GDP is predicted to grow up to 1%, while inflation is set to drop below 5% against 5.8% last year.

Meanwhile, the World Bank recently forecast Russian economic growth at a 1.3% rate in 2017, helped by improving consumption in the country, which is recovering from a two-year recession.

The World Bank report released on June 4 said it sees Russian growth edging up to 1.4% in 2018. Growth in 2016 was negative 0.2%. “Russia is emerging from recession, with a diminishing contraction of consumer demand amid increasing price and currency stability, and a positive contribution from exports,” the report said.

According to a new report by the International Monetary Fund, Russia is recovering nicely from a recession and should see economic growth of 1.4% this year.

Russia is heavily dependent on oil exports and was hit hard when crude prices started to crash in 2014. Economic sanctions imposed by western governments as punishment for Russia taking control of Ukraine’s Crimea region dealt the economy another blow. Now things are looking up.

“The economy is exiting a two-year recession that, thanks to the authorities’ effective policy response and the existence of robust buffers, proved shallower than past downturns,” IMF staff wrote in the report last month.