Russia, the world's largest oil producer after Saudi Arabia, cut its forecast for economic growth this year after lowering its estimate for crude prices.
GDP will probably expand 6.05% this year, down from 6.2% previously forecast, the Economy Ministry said on its Web site yesterday. Russian leaders have warned that growth, which has been bolstered by oil and gas and helped the country pay back billions of dollars in debt, may slow as energy prices fall. President Vladimir Putin has urged the country's largest companies to do more to lessen Russia's reliance on raw materials exports, as crude oil prices dropped below $60 a barrel this year. „The slowing economic growth is an objective reality and we will soon feel its effects,” said Anton Struchenevsky, a senior economist at Moscow-based Troika Dialog investment bank. „The era of cheap money is over.” Record global energy prices have been a boon to Russia, whose economy has expanded for the past nine years after it defaulted on domestic debt, causing the ruble and domestic banks to collapse. Since then, the government's oil fund, which holds revenue from oil sales, increased to 2.7 trillion rubles ($99.9 billion) by the end of January. Record oil prices also helped boost Russia's gold and foreign-currency reserves to $309.5 billion as of February 9.
The Economy Ministry forecast today that oil prices will drop to $55 a barrel in 2007 from $61 a barrel. The government calculates its budget according to the price of Urals, Russia's benchmark blend of crude. Urals is currently trading at about $55 a barrel, a 7% discount to futures on the New York Mercantile Exchange. Oil prices will drop further to $53 a barrel in 2008, $52 a barrel in 2009 and $50 in 2010, the Economy Ministry said. Falling oil prices will cut Russia's trade surplus this year, said Struchenevsky. Still, lower energy prices will also cap inflation and the quality of economic growth will probably improve, he said. Oil, gas and petrochemicals exports accounted for 68% of total exports in 2006, 67% more than the previous year, according to Russia's Federal Customs Service. The surplus ballooned to $164.4 billion from $142.8 billion a year earlier, boosted by an average increase in oil prices of 25%, the customs service said. Russia will extract 492 million tones of oil in 2007, more than double the volume it extracted in 2006, and export 260 million tons of oil this year, the ministry said. By 2010, the nation will extract 514 million tons of oil, and export 271 million tons, the ministry said. Russia's annual inflation rate will fall to between 7.5% and 8% this year, the Economy Ministry said yesterday. The rate slipped to 8.2% in January, the lowest since July 1998, the month before the nation defaulted on most of its domestic debt and devalued the ruble. Inflation is expected to narrow further to between 5.8% and 6.5% by 2010, the Economy Ministry said. (Bloomberg)