30.04.09

The Economic Development Ministry has revised its forecast for 2009 and compiled new forecasts for 2011 and 2012. The new figures for GDP and inflation seem more realistic. The Ministry has become less optimistic in the wake of three significant developments: the prime minister's report to the Duma, preliminary data for the first quarter, and the IMF's forecast for Russia.

A government source told Reuters that according to the Economic Development Ministry's forecast, GDP growth in 2010 and 2011 will be only 3.8% and 4% respectively, rather than 6.6% and 6.2%. The Ministry expects GDP to grow by 4.9% in 2012. For 2009, the Economic Development Ministry agrees with the IMF forecast: GDP to shrink by 6%, not the earlier forecast of 2.2%.

Industrial production will also fall more significantly than previous forecasts indicated: down by 9.1% rather than 7.4% in 2009. This indicator may grow by 3.2% in 2010 and 2.4% in 2011. The Ministry expects the average price of oil this year to be $45 a barrel - more than the figure used for the federal budget ($41 a barrel). The average price of oil should rise by $10 a year over the next three years.

The inflation forecast for 2010 has been raised from 5.5-7% to 10%, and Russia won't achieve 5% until 2012. An Economic Development Ministry source says that these figures "seem like the truth."

Troika Dialog economist Yevgeny Gavrilenkov notes that the Ministry had to start adjusting its forecasts when the preliminary figures for the first quarter were released last week: GDP down by 9.5% instead of the anticipated 7-8%.

Deutsche Bank economist Yaroslav Lisovolik says: "GDP falling by 6% in 2009 is a somewhat pessimistic forecast. Trust Bank economist Yevgeny Nadorshin predicts that GDP will fall by 4% in 2009.

Lisovolik warns that a substantial economic downturn makes it more likely that the budget deficit will exceed the target for 2009: "State spending will grow as the real sector of the economy falls." Lisovolik predicts GDP growth of 4% next year, but adds that "it will be no higher in later years."

Experts say that the revised inflation forecasts are more realistic. However, Gavrilenkov notes that even the 10% inflation predicted for 2010 is "an unacceptably high forecast indicator that would make it impossible to achieve the Economic Development Ministry's growth targets."

The inflation rate ought to be 2-3%, says Gavrilenkov: "A double-digit inflation rate is unseemly for a country that wants to be a full member of the G8, talks of restructuring the global economy, and proposes the ruble as a reserve currency."

Translated by InterContact

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Source: RBC Daily