The Ministry of Finance made a new fall in oil prices due to China

The Deputy head of the Ministry of Finance Maxim Oreshkin warned that the slowdown of China’s economy can return world oil prices to the level where they were in early 2016. The cost of a barrel of Brent on Wednesday is about $49, then in January 2016 it could be between $30 and $40, and in the middle of the month the price fell even lower than $28.

“Serious problems in the Chinese economy could lead to a repetition of the collapse in oil prices that we saw in the beginning of the year. These risks should pay attention to when formirovaniia economic policy, they cannot be dismissed. The whole policy must be built taking into account the risk of a recession in China”, — said the Deputy Minister of Finance. speaking at the Credit Suisse forum on Wednesday.

At the same time, the Deputy Minister expressed confidence that Russia was less affected by the deterioration in the Chinese economy.

“In fact, Russia is the country that was least affected by the Chinese problems. We’ll see because the last couple of years we went through serious adjustments that we think will help in the case that there will be another wave of global economic problems,” said Oreshkin.

According to the Chairman of the Central Bank Ksenia yudayeva, with the slowdown of China’s GDP by one percentage point the dynamics of the development of Russia’s economy worsens by half a percentage point (PP). “The slowdown of the economy by one percentage point translates to a slowdown of the Russian economy by 0.5 percentage points if Russia does not change economic course,” said Yudaeva (quoted by “Interfax”).

In the first quarter of 2016, China’s GDP grew at an annual rate of 6.7 percent (to $2.44 trillion), which was the worst result in seven years (in the first quarter of 2009 GDP growth was 6.2%). For comparison, in the first quarter of 2015, China’s GDP grew by 7% in the fourth quarter of 6.8%, and for 2015 is 6.9%. According to estimation of Ministry of economic development, Russia’s GDP in the first quarter of 2016, declined at an annual rate of 1.4%.

Yudaeva also warned that in the near future, any fluctuations in the economy, China will inevitably affect the development of the global economy. “We in Central Bank needs to constantly monitor the situation and take measures to preserve financial stability,” added Yudaeva.

In early may 2016, the international rating Agency Standard&Poor’s warned that in the event of a sharp drop of investment average growth of China’s economy in 2017-2020 is expected to fall to 3.4%, which will lead to a sharp drop in oil prices (to $20-30 per barrel). Evaluation S&P, the implementation of such a scenario will lead to further reduction of Russia’s GDP by 5.5%.