The Russian Economic Development Ministry has made a forecast of Russian economic development in case of a new round of the economic crisis and a drop in oil prices to $60 for a barrel.
If that happens, Russia will be in for radical ruble devaluation but the GDP will not contract as badly as in 2008-2009. Finmarket agency has got hold of the text of the scenario conditions of a critical option of the forecast of social and economic development in 2013-2015 tabled by the ministry to Russian Prime Minister Dmitry Medvedev.
The moderately optimistic scenario of future developments implies that the Eurozone will succeed in reducing the acuteness of the crisis and resuming growth in 2013 with the budget consolidation in Europe and the United States not hindering growth. The world economy would then be growing at 3-3.5% in 2012-2013 and accelerate to 4% in 2014-2015. In this case Russian economic growth in 2012-2015 would amount to 3.4-4.7%.
Along with that the ministry made two forecasts in case the crisis gets deeper - one moderate (called scenario A in the ministerial document) and the other more pessimistic (scenario A2).
According to scenario A, Europe will fail in stopping the deepening of the debt crisis. Most European countries will be in recession in 2013 and it will take them several years to recover. The GDP of the Eurozone will slip 0.6% in 2012 and 1% in 2013. However, a banking crisis will be avoided. The U.S. will succeed in avoiding the tougher version of budget consolidation but economic growth will slow down. In this case the growth of the world economy will drop to 2.5% in 2013.
If this scenario materializes, in 2014-2015 the Eurozone economy will succeed in returning to a growth trajectory of 0.3-0.7%. World economic growth may return to 3.7% in 2015.
In this case oil prices will fall to $80 in 2012-2013 but will rebound after that.
As for Russia, its economic growth would then slide down to 0.5-1% in 2013 and then recover to 3-3.7%. The ruble will fall temporarily against the dollar to $1=37.2 in 2013, inflation soar to 8.6% and the speed of growth of household incomes go down to 1% in real terms.
In this case budget revenues may prove to be 150 billion to 300 billion rubles lower than in the benchmark scenario (0.3% of GDP).
The A2 scenario would mean the aggravation of the crisis in the Eurozone. In this case the GDP there would drop by 2.8% in 2013 with the risk of defaults of several countries and banks growing. The political and economic configuration of the Eurozone could change. In 2014 the fall would transform into stagnation, the banking sector would be cleared, corporate and private lending would revive.
In this case in 2013 world economic growth would stand at 1.2%. In 2015 it would return to a level exceeding 3%, mainly through the realization of the growth potential of the economies of the United States and BRIC countries.
The average annual price of oil could fall to $60 in 2013. This would bring Russia's export revenues down 31% in 2013. In this case the ruble would fall to $1=45.9 rubles in 2013 with subsequent adjustment. The deterioration of the foreign market situation and the sharp fall in export revenues would bring down Russia's GDP by 2-2.7% in 2013. However, as the situation improves Russia's economic growth could resume at an annual a pace of 2-4%.
In this case Russian budget revenues could be 1.1 trillion -1.2 trillion rubles (1% GDP) smaller compared to the benchmark scenario. The Economic Development Ministry notes that despite the bad fall of the oil price the relative impact on the budget would be lower because it will be set off by the positive effect of the ruble devaluation. In addition, a weaker ruble would spur inflation which would also have a positive impact on nominal budget indicators.
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