With increasingly oil markets volatile, Russia’s Ministry of Finance has come out with a game plan. The Ministry sees oil,the backbone of Russia’s economy, falling to $80/bbl from 2016 to 2030, down from two–year peak of $115/bbl.
The overall strategy is based on the assumption oil prices will fall, and the budget will not return to pre-crisis levels, but will meet all state needs, Vedomosti reported after receiving the document pre-publication.
Russia’s economy hasn’t expanded since the fourth quarter of 2011, and the Kremlin, which has tried its best to deny a forthcoming recession, has amended its budget to get ready for slowed economic activity.
Russia recently lowered its 2013 economic-growth forecast from 2.4 percent down to 1.8 percent, the second amendment this year. In Q2, the economy expanded 1.2 percent.
The most optimistic trajectory assumes a short – term drop in oil to $60 per barrel from 2016, with quick price recovery to follow.
Less favorably, oil will steadily plateau at $80 per barrel.
All of the three scenarios, however, involve a cut in budget spending, as well as lower revenues. If the oil price falls sharply, Russia plans to dip into its Reserve Fund – mainly to finance infrastructure developments.