Saturday, March 29, 2014

29/3/2014: Almost Armageddon? WorldBank Forecasts for Russian Economy

This week World Bank published their outlook for Russian economy. Here are two core forecast scenarios:



And a summary of the Government fiscal policy framework, covering adopted budgetary targets:

Key takeaways:

  1. Ugly 2014 one way or the other (high and low risk scenarios)
  2. Ugly non-oil balances on Government side
  3. More conservative budgetary basis (oil price) than media allows
  4. Highly conservative deficit targets despite economic growth slowdown (should EU want to find a fiscally responsible neighbour to match own 'austerian' ethos - Russia is a good candidate)
  5. Gross capital formation is ugly and showing no sign of uplift on investment side which offers policy room for supporting some growth momentum
  6. Capital account is assumed to be really, really ugly in high risk scenario (USD133 billion outflows) which is likely to trigger capital controls should things deteriorate this much
Russia comparative to the rest of the world:

It does look like 2014-2015 are being set (in World Bank view) as trend-breaking years for Russia

Note: Capital outflows tracing back few years:

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