Bank of America predicted the collapse of the ruble in 2017 if oil under $25


The dollar by the end of 2016, will cost 65 rubles, inflation will reach 5.8% and GDP will shrink by 0.5% if the average annual price of Urals oil will be $43 per barrel, according to the forecast of Bank of America (BofA) Russia: hawkish to dovish guidance story for 2016 and 2017 (at the disposal).

Indicators for 2017 BofA analysts expected according to two scenarios — base and adverse. Under the baseline scenario, in 2017 the average price of a barrel of Urals oil will be $59, and the dollar will be worth 65 rubles Inflation in Russia in this case will reach the Central Bank target of 4% at the end of 2017, while GDP will grow by 1.1%. The key rate of the Bank of Russia, according to BofA, at the end of the year will be reduced to 8% from current 10% per annum.

Negative scenario envisages a drop in the average cost of Urals to $25. In such a scenario the dollar by the end of the year will rise to $ 90, GDP will fall 2.4%, inflation will total 7.1%, and the Central Bank will keep the key rate at 10%, follows from the forecast of Bank of America.

“Under this scenario, we expect that the Russian economy will show a decline of 2.4%. The ruble may weaken to about $ 90, which could have a significant inflationary pressure, especially given the low base effect from the deflationary trends of this year. All this is likely to keep its key interest rate from lowering in comparison with a decrease by 200 b.p. in the baseline scenario”, — specified in the review.

The Bank of Russia at the end of September presented the project “guidelines for the single monetary policy for the 2017-2019” which contains two scenarios. The baseline scenario of the Central Bank suggests average price of a barrel of oil at $40 in the next three years. The second scenario-which the regulator calls “risky”, provides for a reduction in the price of oil to around $25 per barrel by the beginning of 2017 and its preservation at a low level until the end of 2019.

Previously, the Bank estimated that the average price of oil at $25 per barrel, the dollar will exceed 95 RUB the Raiffeisenbank noted that the stress scenario is unlikely.

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