Russian central bank cuts growth forecasts

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FE Team | Published: November 12, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

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MOSCOW, Nov 11 (Reuters): Russia faces the prospect of three more years of sanctions and stagnation, the central bank said on Monday, honing its tactics to defend the rouble from the fallout of President Vladimir Putin's Ukraine policies and dependence on oil revenue.
In its annual monetary policy strategy document, the bank's base scenario expected just 0.3 per cent economic growth in 2014, zero growth in 2015, and 0.1 per cent growth in 2016, with only a modest revival, to 1.6 per cent, in 2017. It had earlier forecast 0.4 per cent this year, 1 percent next year and 1.9 in 2016.
The bank also predicted net private sector capital outflows would now reach $128 billion in 2014 and $99 billion in 2015, up sharply from its previous forecasts of $90 billion and $35 billion respectively.
Separately, it scrapped the rouble's corridor against a dollar-euro basket, formalising a decision effectively made last week when it announced limits to intervention after spending $70 billion to prop up the currency this year.
The rouble has lost almost a quarter of its value since the middle of the year when Putin's backing for separatists in Ukraine sent East-West relations to a post Cold War low.
On Monday it was up around 2.0 per cent after the central bank said it would replace daily intervention with purchases at any time to punish speculators and temporary restrictions on rouble liquidity to prevent market "games".
The central bank said its base forecasts anticipated Western sanctions imposed over Ukraine lasting at least until the end of 2017. The first official assessment of their duration, its view tallied with that expressed by influential former finance minister Alexei Kudrin in September.
Its forecast also assumed a modest recovery in the oil price to $95 per barrel next year, followed by a further decline, a scenario some analysts thought could be too rosy.
"Oil at 95 (dollars) may be optimistic, but the assumption of sanctions staying until 2017 seems very realistic and suggests Russia is planning for the long haul," Standard Bank analyst Tim Ash said in a note.
Sanctions imposed by the United States and European Union against major Russian banks and companies over Moscow's role in Ukraine have led to a virtual freeze on investment inflows that has contributed to the rouble's slide. The falls have been amplified by growing demand for foreign currency from Russians fearful about the value of their savings, but there is little to suggest the economic woes are creating political difficulties for Putin.
On Monday he said there was no fundamental economic reason for the rouble's slide; Finance Minister Anton Siluanov also weighed in, saying it was clearly undervalued and he hoped its volatility would cease by the end of the year.
Putin's public approval rating is at a record high of 88 percent according to the Levada Centre polling agency, boosted this year by patriotic support for his policies in Ukraine, notably the annexation of Crimea in March.