Russia will fare worse than projected in 2012 amid an expected drop in global oil prices and the ruble’s recent depreciation against major world currencies, Deputy Economics Minister Andrei Klepach said late on Wednesday.
The ministry is scheduled to present its adjusted economic outlook for 2012 in September, but has already made public some of its reviewed parameters for the country’s economic development this year.
The ministry has raised its inflation forecast for this year from the previously expected 5-6 percent to 7 percent, citing rising food prices and the ruble’s recent weakening against the U.S. dollar.
“We said even before that inflation would be slightly higher than we had expected for the year, basically, due to the food factor to about 7 percent by December,” Klepach said.
The growth in food prices was the main driver of inflation this year, he said.
“After all, world prices are higher and now we see a substantial growth in grain prices due to the drought in some regions and, correspondingly a rise in flour and fodder prices.”
Average world oil prices are also expected to be lower, at about $109 per barrel, down from the previous forecast of $115 per barrel. The ministry projected the price of oil, a major export commodity and a key source of Russia’s budget revenues, at $110 per barrel at the start of the year but upgraded its forecast in spring to $115 per barrel.
Net private capital outflow from Russia is expected to exceed the ministry’s forecast of $50 billion this year and the negative trend may continue into 2013, Klepach said.
Russia’s Economic Development Ministry previously projected capital outflow from Russia at $25 billion in 2012.
“Our estimate for July outflow is $3-5 billion. The Central Bank also estimates this figure at $5 billion. So the trend towards outflow will persist for some time,” Klepach said.
Russia’s net private capital outflow fell to an estimated $9.5 billion in the second quarter of 2012 from $33.9 billion in the first quarter, according to Central Bank data.
Capital flight from Russia peaked at $133.7 billion in 2008 when the global economic crisis broke out, falling to $56.1 billion in 2009. Capital outflow from Russia stood at $80.5 billion in 2011 compared with $34.4 billion in 2010.
Klepach gave no adjusted figures for Russia’s economic growth in 2012, saying there were no considerable drivers for GDP expansion.
“As we said before, we see a trend towards slower growth. If we look at demand, then from the viewpoint of the slowing of consumer demand, which has reached its limits, there is a considerable constraint in income dynamics,” he said.
In April the Economic Development Ministry cut its forecast for Russia’s 2012 economic growth from 3.7 percent to 3.4 percent.
On the positive side, Russia is unlikely to post a budget deficit in 2012, Klepach said .