Russia

OIL prices will be higher but GDP will grow more slowly, according to the Russian Economic Development Ministry’s updated 2012-2015 socio-economic forecasts. The main changes to the forecast are for the current year: The average oil price has been raised to $115 from $110 a barrel in 2012. But oil is no longer the driver of economic growth — the GDP growth forecast has been lowered 0.3 per cent to 3.4 per cent from 3.7 per cent, and industrial output growth to 3.1 per cent from 3.6 per cent, due to the declining forecast for growth in investment demand to 6.6 per cent from 7.8 per cent and a higher estimate for import growth in real terms. Expectations for consumption rise to 6.3 per cent from 5.5 per cent in 2012, making the overall forecast more “consumer-oriented.”

The higher oil price forecast this year is the main reason for the now stronger rouble forecast, which is expected to average at 29.2 roubles/$1 in 2012, compared with a previous forecast of 31.1 roubles. GDP growth of 4.4 per cent is expected in 2013 and 4.7 per cent in 2015. Industrial output could rise 3.4 per cent in 2013 and 4.2 per cent in 2015. The inflation forecasts are unchanged at 5-6 per cent in 2012, 4.5-5.5 per cent in 2013, and 4-5 per cent in 2015. But the forecast for investment demand in 2012 has been lowered “largely due to the base effect and because investment demand is recovering fairly shakily for now. There are risks that investment growth will be lower than 6.6 per cent in 2012. Investment growth should be above seven per cent again in 2014-2015.

The import forecast in nominal terms is raised to $370 billion from $369 billion in 2012, lowered to $407 billion from $413 billion in 2013. Import growth in real terms is raised to 12.5 per cent from 11.4 per cent for 2012 and lowered to 8.1 per cent from 9.7 per cent in 2013. The export forecast is raised to $558 billion from $513 billion in 2012, to $526 billion from $515 in 2013.Exports will grow more slowly than imports in real terms: by 2.3 per cent in 2012 and 2.8 per cent in 2013. The Economic Ministry expects a current account surplus of $83 billion in 2012 and $23 billion in 2013 but a deficit of $9 billion in 2015.

The Russian Ministry for Economic Development has evaluated that oil prices may drop to $80 per barrel in 2012-2013. The financial crisis of the eurozone would continue in 2013. The GDP of the eurozone may drop to 0.6 per cent in 2012 and one per cent in 2013. The world economic growth rate in 2013 will drop to 2.5 per cent. Russia’s economic growth rate in 2013 may drop to 0.5 to 2.1 per cent, then reach 3 to 3.7 per cent annually. The dollar rate in 2013 will total 37.2 rubles, inflation will reach 8.6 per cent. Consumer prices grew at the fastest rate this year in July, accelerating 5.6 per cent from 4.3 per cent the previous month, near the top end of the central bank’s target range of five per cent to six per cent.

Former Russian Finance Minister believes a 3-4 per cent decline in the country’s economy in 2013 is very likely even as the authorities expect GDP to increase next year by 3.8 per cent. However, a 3-4 per cent decrease in GDP would not be “critical” for the cyclical development of the economy. A cyclical crisis should not be feared as no amount of funds would avert it and the use of funds would become less effective. The peak of the crisis would start after GDP declines by over 3-4 per cent. A latest report by Moody’s Investors Service reveals that the Russian economy could contract five per cent over the next 10 to 12 months and the ruble could depreciate 30 per cent if the euro-zone crisis intensifies.

Meanwhile, Russia’s economic expansion eased in the second quarter to the slowest pace in a year as weaker growth in China and Europe’s debt crisis curbed demand for its commodities exports. GDP rose four per cent from a year earlier, the weakest pace since the same quarter of 2011 and down from 4.9 per cent in the January-March period, according to the Federal Statistics Service in Moscow. A slowdown further in the second half is certainly on the cards. The contribution of foreign sales to economic growth looks less certain with exports hit by faltering demand from the EU.

Poland

THE Polish government may cut its 2013 economic-growth forecast to as low as 1.5percent due to the euro region’s contraction, according to an economic adviser to Prime Minister. While Poland faces no risk of recession, the government may need to “adjust” its forecast for growth next year to 1.5-2 per cent, down from a preliminary estimate of 2.9 per cent, as the currency bloc’s debt crisis intensifies and recession spreads across the euro countries. The government approved a draft 2013 budget in June that assumed growth will accelerate to 2.9 per cent from 2.5 per cent this year. An expansion of 1.5 per cent next year would be Poland’s slowest since 2001. The economy grew 4.3 per cent in 2011 and 3.5 percent in the first quarter of 2012 from a year earlier. It will be the fastest-growing EU economy this year, according to the European Commission May forecast.