Latest News

In a 'trade-war' scenario, Russia's economic growth in 2025 is projected to be 1.8%

The Russian economy is at risk from international trade wars triggered by protectionist policies in the United States, says the Economy Ministry. It published for the first-time its forecasts of high risks on Wednesday.

This scenario projects the price of Brent crude to be $58.1 a barrel. It will then drop to $50 a barrel by 2026. The economic growth in Russia will be 1.8% compared to the 2.5% of the base scenario which is considered too optimistic by most economists.

The ministry stated that the scenario "assumes an escalation in trade wars, and a significant slowdown of the global economy which will reduce the global demand for oil and other Russian traditional export commodities."

The ministry previously reduced its forecast of the average price for Brent oil in 2025, in the base scenario, by almost 17%. This equates to $68 a barrel. In the first quarter of this year, Russia's oil revenues and gas revenues decreased by 10%.

The base scenario projects the average price of Urals blend oil to be $56 per barrel by 2025. In contrast, the Urals blend is expected to cost $48.8 a barrel.

The ministry predicted that the inflation rate in 2025 in the high-risk case would be 8.2% compared to 7.6% for the base scenario. It also warned against a delay in reducing the key rate of the central bank.

The ministry warned that "the risk is an untimely shift to a softer monetary and credit environment, which would limit the growth in investment activity and expansion of domestic product."

In the high-risk scenario, the rouble is expected to fall to an average of 96.6 dollars per rouble in 2025. This compares to 94.3 for the base scenario.

The ministry stated that "the volume of exports of goods will decrease more than imports of goods, which will result in a reduction of trade balance, and as a consequence, a stronger depreciation" of the rouble. (Reporting and writing by Darya Kosunskaya; editing by Ed Osmond).

(source: Reuters)