At 30 dollars for oil and 80-85 rubles per dollar, the budget deficit will be about 5-5,2% of GDP, in this situation, the government will need to reduce costs by 2%, says chief economist Merrill Lynch on Russia and the CIS Vladimir Osakovsky.
MOSCOW, 26 Jan. The decline in oil prices or their persistence at low levels increases the likelihood of the Russian government’s economic reforms, believes the chief economist of Merrill Lynch, the investment division of Bank of America, for Russia and the CIS Vladimir Osakovsky.
The baseline scenario of economic development of the Russian Federation Merrill Lynch for the current year assumes GDP is close to zero, the dollar on average for the year and at the year-end in 65 rubles when the price of oil is at $ 46.
As noted Osakovsky, the government of the Russian Federation takes active efforts to balance the budget. “The scale of the budget deficit this year is not much different from the 3% of GDP,” said economist journalists.
According to him, 30 $ for oil and 80-85 rubles per dollar, the budget deficit will be about 5-5,2% of GDP. In this situation the government to reach deficit of 3% of GDP will need to reduce costs by 2%.
“Because in the face of declining oil prices the government was forced to reduce costs and to limit its support for the economy, we think that government spending can become one of the main engines of economic downturn,” he continued. However, the baseline scenario of recovery in oil prices the situation will change for the better, I’m sure Osakovsky.
“In an environment of tightening budgetary constraints, the government has more opportunities to start important economic reforms, privatization, progress on pension reform… the longer oil prices remain low or decrease, the likelihood of progress on all these points, only grow”, — concluded the expert.