RUSSIA: CAREFUL APPROACH
Russia isn't buying into the optimism that a rally in oil has legs.
Supply disruptions including Canadian wildfires and militant attacks in OPEC member Nigeria have driven prices higher, with the improving outlook for crude not grounded in fundamentals, Finance Minister Anton Siluanov said at a government meeting in Moscow on Thursday. Prime Minister Dmitry Medvedev said at the same event that the situation was reminiscent of a rebound in the second quarter of last year, which was followed by a "rather serious" decline in prices.
"There are still no fundamental factors for growth in oil prices," Siluanov said. "We should plan our financial resources on that basis."
The assessment is at odds with views expressed last week at a gathering of the Organization of Petroleum Exporting Countries in Vienna, where the group's members said the oil market was moving in the right direction. The renewed optimism came after prices rose more than 85 percent in New York since touching a 12-year low in February. Forecasters including the International Energy Agency and Goldman Sachs Group Inc. say the crude glut that caused prices to collapse in 2014 is finally dissipating.
Russia, the world's biggest energy exporter and second to Saudi Arabia in crude shipments, has delayed amending this year's budget, still based on an average oil price of $50 a barrel, as the market has stabilized. The economy is into its second year of recession, with the Finance Ministry struggling to keep the budget deficit within 3 percent of gross domestic product after it reached the widest in five years in 2015.
Authorities are seeking fiscal savings of one percentage point of GDP each year to balance the budget by 2019. The Russian Economy Ministry projects that oil will average $40 a barrel through 2019. The nation's main export blend Urals averaged $33.93 in the first four months of the year.
"There are certain similarities to last year's situation," Medvedev said. "So we need to be careful with our spending commitments. In that sense, the Finance Ministry's approach clearly deserves support."
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.