The path to recovery for the Russian economy will be longer and harder than previously expected, warns the world Bank (WB). According published on Wednesday the report of the world Bank, in 2016, the gross domestic product (GDP) of Russia will decrease by 1.9% and not 0.7% as previously expected. As a result following the results of current year Russia’s GDP will remain “significantly below” the level at which it was four years ago.
The main reason for the deterioration of the situation the world Bank experts called the persistence of low world prices for oil. According to the baseline forecast, average by 2016 the price of a barrel of Brent will be only $37, whereas in the previous version of the document was expected to grow to $53. The oil price forecast new baseline scenario of the WB was more pessimistic than the pessimistic forecast of the sample in September 2015 — then even the skeptics believed that average by 2016 the price of a barrel falls below $40.
Now as the drop limit is considered $30. If on average, the price of oil will be at this level, the fall of Russia’s GDP will accelerate to 2.5% and the budget are waiting for additional tests.
“Russia has accumulated sufficient budgetary resources to overcome the temporary worsening of the terms-of-trade, however, the preservation of bearish dynamics of global oil prices has already seriously undermined its reserves. Russia will be difficult to meet the target budget deficit figures for 2016 to 3% of GDP, and the need to Finance the excessive spending of the budget will continue to Deplete the Reserve Fund of the country”, — stated in the report of the WB.
According to the chief economist of the world Bank for Russia Birgit Hansl, the devaluation of the rouble helped offset some of the losses from the fall in oil prices, allowing Russia’s coffers have suffered less than the budgets of other major oil exporters. However, the adaptation of the economy to the deteriorating external economic environment led to a sharp decline in real incomes and rising poverty.
In the world Bank report projected that in 2016 the poverty rate in Russia will grow from 13.4% to 14.2% and return it to the indicators of 2007.
“In the baseline scenario the number of poor people in 2016 will increase by 1.1 million people. This increase will nullify the progress made over the last ten years, and will be the most significant increase for the period after the economic crisis of 1998-1999”, — the document says.
Previously, experts of the Institute “development Center” Higher school of Economics (HSE) reported that in 2017-2019, the real wages of the average Russian will be approximately 15% lower than in 2014.
“The stock of the loyalty of the population to the deterioration of the standard of living is not unlimited and may be exhausted in the future. Together with the growing discontent polyarchenko business it will create a pressure to change domestic and foreign policy,” warned the HSE experts.
Yesterday Bloomberg reported that the majority of experts who participated in a donation poll, believe that even a serious budget deficit will not force the Russian authorities to reduce expenditure on the army.