The Russian Finance Minister has warned that oil prices will slip unless OPEC and non-OPEC countries remain committed to output cuts agreed in December [Xinhua]
Russia’s economy is still largely dependent on the export of oil, Tatyana Golikova, Chairwoman of the Accounts Chamber – parliament’s financial control body for the Russian Federation, told local media on Friday.
Russia’s economy slumped since 2015 following European Union/US sanctions and the dramatic drop in oil prices in the past two years.
Russian economists had warned that the country would be in trouble if oil prices were maintained below $30 a barrel. And for a while in February, the risk was considerable as oil prices fell to 11-year lows of $26.
GDP growth contracted 3.8 per cent in Q4 in 2015 and is estimated to have contracted 0.7 per cent in 2016.
Russia’s Central Bank Governor Elvira Nabiullina has predicted a slight GDP growth in current Q4.
Analysts point to the surge in global oil prices as a positive trend to help Russia lessen the impact of EU and US sanctions but caution that the recovery from recession won’t happen immediately.
The Central Bank’s assessment of the health of the Russian economy is based on the math that oil prices are at $40 a barrel.
Although recent oil prices have hovered around $55 a barrel, the Bank maintains that overall in 2016, GDP will grow in 2017 by up to one per cent.
In an interview with the Russian TASS news agency, Golikova cautions that any excess funds derived from selling oil at higher prices should be retained and not spent.
“What we definitely should not do is spending the extra money until we understand how the situation is developing. We will always have time to spend and we know how to do this. Not always effectively though but we know how,” she told TASS.
Her caution comes in tandem with warnings from Russian Finance Minister Anton Siluanov that oil prices could continue to drop in 2017.
“Today there’s a very tight balance on the oil market, we’re seeing that nobody is cutting oil production. We’re likely in the short term to see further decline in prices for this commodity,” he told the Interfax news agency.
On Friday, international benchmark Brent Crude was down 1 per cent to $55.45 a barrel.
The BRICS Post with inputs from Agencies
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