Russia economics ministry revises upward GDP forecast to 6.6% -1

Other News Materials 8 August 2006 10:45 (UTC +04:00)

(RIA Novosti) - Russia's economics ministry said Monday it had revised its forecast for GDP growth in 2006 to 6.6% from 6.5%.

The ministry's basic "moderately optimistic" forecast, which will lay the basis for a 2007 budget and a three-year financial plan, projects GDP growth at 6% in 2007, 5.8% in 2008 and 5.9% in 2009, reports Trend.

The forecast is based on trends in world oil prices. It expects the annualized price of Russia's Urals crude to be $65 per barrel this year, $61 per barrel in 2007, $54 per barrel in 2008 and $48 per barrel in 2009.

"We believe the uptrend in oil prices will continue until 2008-2009," said Andrei Klepach, the director of the ministry's department for macro-economic forecasting.

The ministry also prepared a highly optimistic and a highly pessimistic forecast for reference purposes. The first is based on the growth of oil prices to $70-80 per barrel by 2009 and predicts GDP growth at 6.4% in 2007, 6.1% in 2008 and 6.2% in 2009. But Klepach said the Russian economy under this scenario would fail to absorb surplus oil revenues and this situation could trigger inflation growth.

The second reserve scenario is based, on the contrary, on a dramatic decline in world oil prices and projects GDP growth at 5% in 2007, 4.8% in 2008 and 4.9% in 2009.

But Klepach said the Russian economy would continue its sustainable development under any of the above scenarios.

The ministry official also said the ruble would not change considerably against the dollar in nominal terms in the next three years.

"In nominal terms, there will be no significant changes. The ruble rate will remain virtually stable," Klepach said.

The ministry's official said the ruble/dollar nominal rate would stay at the level of 26.7 rubles to the dollar in late 2006, 26.4 rubles to the dollar in late 2007, 26.7 rubles to the dollar in 2008 and 27.1 rubles to the dollar in 2009.

The economics ministry also revised upward its forecast of industrial production in Russia from 4% to 4.7% in 2006.

Klepach also said the ministry expected a net capital inflow and the expansion of accrued investment in Russia in the next three years.

"In 2006-2009, we project a net capital inflow due to an expected repatriation of capital, the growth of borrowings and the initial public offerings of Russian companies," Klepach said.