The Russian economy still clouded by the prospects of lower crude oil prices, the Finance Ministry said in a report published Monday. File Photo by Alex Volgin/UPI | License Photo
Feb. 6 (UPI) -- Oil prices might not break through a ceiling of $60 per barrel before 2019 and continue to present risks to Russia's economy, the Finance Ministry said.
The Central Bank of Russia last week pointed to slow growth for 2017 in defense of a decision to keep its key rate unchanged at 10 percent. That came even as the bank's board of directors said economic recovery last year was better than expected.
The Russian Finance Ministry said domestic borrowing by 2019 may approach record levels at about 1 percent of gross domestic product as the economy faces lingering headwinds.
"The oil price dynamics will still be one of the key risks for the Russian economy over the projected period (2017-2019)," the ministry reported. "Given the global demand and supply trends oil prices are expected to hover around $40-60 per barrel in the mentioned period."
Russia's economy relies heavily on revenue from crude oil exports to the European and Asian markets. Maxim Oreshkin, the economic development minister, said inflation was within guidance and growth this year would be about 1 percent during the first half of the year, a rebound after oil-price related downturns last year.
Russian President Vladimir Putin said the national budget for 2017 was pegged on oil priced at around $40 per barrel. The price for Brent crude oil, the international benchmark, was around $57 per barrel in early Monday trading.
Russia is party to a joint agreement with the Organization of Petroleum Exporting Countries to trim output in an effort to balance a supply-side market that's putting negative pressure on crude oil prices.
David Lipton, a deputy director at the International Monetary Fund, said in an interview with Russian news agency TASS that, given the uncertainty surrounding compliance with the agreement, economic planners at the Kremlin had to prepare for an either-or scenario for the direction of crude oil prices.
In its market report for December, OPEC said it expected Russia to produce 11.1 million barrels per day this year, up about 500,000 bpd from 2016.