Russia can absorb external shocks but growth to be modest
The World Bank considers the Russian economy to be well-prepared to resist external volatility due to sufficient fundamentals. Nonetheless, the organisation's latest report predicts modest economic growth in Russia in 2019-2020. Possible expansion of Western sanctions and high geopolitical tension level have contributed to an unfavorable outlook.
Russia is well-positioned to withstand external shocks such as oil price volatility, says Oilprice.com citing the World Bank's most recent Russia Economic Report. The country can absorb shocks due to high level of international reserves ($461 billion), small international debt (29% of GDP) and ''comfortable import cover'' (15,9 months).
Global oil demand is likely to be ''robust'', reads the report, citing the International Energy Agency forecast of a 1,4-million-bpd increase. Over the next three years, the World Bank expects oil prices to average $71 per barrel, noting that there is still ''considerable uncertainty'' to this forecast. Overall, the global oil industry is facing extreme volatility period, and the trend is expected to continue. In November, Russia's oil output decreased to 11,37 million bpd after October's record level of 11,41 million bpd, according to preliminary data. The country is eyed closely on the threshold of this weekend's OPEC meeting in Vienna, as Russia's participation or reluctance to participate in new oil production cuts may be a break moment for the cartel.
As for economy growth forecasts, the World Bank expects Russia's GDP to grow by 1,5% in 2019 and by 1,8% in 2020. Is has also slightly lifted its projection for 2018 to 1,6% (in May, it expected 1,5%). ''In the absence of a sharp escalation of geopolitical tensions, we expect the Russian economy to continue modest growth supported by relatively high oil prices,'' reads the report, explaining that the potential sanctions expansion and continued elevated geopolitical tensions translate into high uncertainty that dampens domestic demand.
The international financial institution points out that the country's banking sector remains relatively weak. In the past few years, many local banks lost their licenses, while some major banks were rescued by the state. At the same time, the banking system has sufficient liquid foreign currency assets to repay its maturing external debt, the World Bank considers.