December 03, 2008

Recession reports - Russian GDP growth could slip to 5.7%

RIA Novosti cited Mr Alexei Kudrin finance minister of Russia as saying that Russia's GDP growth could drop to 5.7% in 2009 against the official forecast of 6.7% due to the ongoing global financial crisis.

He said that "This is only a forecast, it needs a major study. Net capital inflow into Russia could be less than USD 30 billion in 2008 compared with the original forecast of USD 40 billion.”

Mr Kudrin said world oil prices may drop to USD 70 per barrel but will most likely stabilize at around USD 90 per barrel or slightly lower in the near future, adding that the budget would be able to withstand price fluctuations for more than three years, even if the price of crude fell to USD 40 per barrel to USD 50 per barrel.

He said that 2008 budget would remain balanced with oil prices ranging from USD 60 to USD 70 per barrel. Next year, the federal budget will be deficit-free with oil prices at a level of USD 70 per barrel.

Mr Kudrin said the draft federal budget for 2009 to 2011 is based on an average yearly oil price of USD 95 per barrel in 2009, USD 90 per barrel in 2010, and USD 88 per barrel in 2011. Inflation is expected to hit 7.5% to 8.5% in 2009, 5.5% to 7% in 2010 and 5% to 6.8% in 2011.

Mr Kudrin said investment into Russia is expected at RUB 9 trillion but only around 10% of this will come in the form of loans, a low percentage compared to developed countries, adding that the stock market and loans should become the main source of investment in Russia.