CBR sees Russian economy contracting 3.5–4 % this year

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/12

The central bank forecast further expects the GDP to fall 1–1.6 % in 2016 but return to growth of 5.5–6.3 % in 2017. The CBR’s outlook assumes the price of oil will this year average $50–55 a barrel, $60–65/bbl next year and $70–75/bbl in 2017. Economic sanctions are expected to remain in place for most of the forecast period, thereby limiting the access of Russian firms to foreign financing.

The CBR estimates that this year private consumption will contract 5.6 % and fixed capital investment as much as 10–12 %. Last year, consumer demand grew 1.9 %, while fixed investment fell 2.5 %.

As oil prices will likely remain depressed and domestic investment has dried up, the CBR has had to lower its calculated potential growth of the Russian economy from 2 % a year to around zero. With economic recovery, the CBR sees potential growth rising to around 1 %. Before the 2008–2009 financial crisis, the CBR estimated the economy’s potential growth was in the range of 4.5–5 % a year.

Russian spending on goods imports and revenues from goods exports will each fall this year by about 27–28 %. Although the trade surplus will shrink slightly, the current account surplus will climb from $57 billion last year to $64 billion this year. That is partly due to a fall of 38 % of services imports, which is largely driven by foreign travel.

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