The Russian government is trying to figure out how (or how far) to revise the oil price forecast downward, but may not formally revise the budget. The presenter notes that this difficult decision will ultimately be up to Putin and concludes that Russia may have two budgets this year - a magical one and a real one.
Wednesday, January 14, 2009
Vedomosti Vid on the Russian budget
An interesting, though not particularly in-depth, report into Russia's budgeting woes - apparently the official budget for 2009 contemplated an average oil price of $95/bbl, with the worst-case scenario pegged to $50/bbl. Even that now seems like it may be unrealistically high, as Kazakhstan, for example, recalculated its budget based on a $40/bbl assumption last fall and (according to this video) is now using an estimate of $30/bbl for 2009.
The Russian government is trying to figure out how (or how far) to revise the oil price forecast downward, but may not formally revise the budget. The presenter notes that this difficult decision will ultimately be up to Putin and concludes that Russia may have two budgets this year - a magical one and a real one.
The Russian government is trying to figure out how (or how far) to revise the oil price forecast downward, but may not formally revise the budget. The presenter notes that this difficult decision will ultimately be up to Putin and concludes that Russia may have two budgets this year - a magical one and a real one.
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4 comments:
Interesting, Lyndon. I was actually surprised that according to the video Putin signed the budget in November when it was already apparent that their projected oil prices are unrealistic. I guess even a supposedly straight-shooter didn't want to deal with the bad news. What is he doing now, looking for a scapegoat?
Lyndon, are you in London or New York? And try not to accumulate too many billable hours!
Kolya
Kolya, being charitable (and knowing that a lot of people were feeling this way last fall), I think maybe he was just hoping things might turn around.
I've been in London since the end of September. So far, so good.
Yes, he obviously was hoping things will turn around. November, though.... My sense of things is that in October and November people all over the world were more worried than they are now about the bottom falling out. But that's only from reading what's out there for people like me (no privilege info/analysis.) -- Kolya
Well, if I recall correctly the very low point for the world markets was around Nov 20, so I guess if we're trying to read his mind (and assuming he wasn't just trying to paper over the troubles already known) we'd have to know when he signed in Nov. I think there was more concern of a catastrophic short-term outcome in Oct-Nov, but my own sense (which shouldn't really be lent much weight at all) is that there is now more concern about something that, while perhaps not catastrophic and manageable in "the West" might last longer than the 2-3 quarters people had initially been predicting.
Below is an interesting story (translation is from today's JRL) about the Russian economy and budget:
Nezavisimaya Gazeta
No. 7
January 19, 2009
ROUGH LANDING PREDICTED FOR THE RUSSIAN ECONOMY
Growth forecasts from state officials and experts are increasingly grim
Pessimistic predictions for the Russian economy in 2009
Author: Igor Naumov
[The Economic Development Ministry is still working on a revised
macroeconomic forecast for 2009. Meanwhile, disturbing outlooks
for the Russian economy are presented in the latest forecasts from
Merrill Lynch, the World Bank, the United Nations, and the EBRD.]
The Economic Development Ministry's more specific forecast
for Russia's macroeconomic development in 2009 was supposed to be
ready today. But a source close to the Economic Development
Ministry told us yesterday that there are no plans to submit
anything to parliament officially on January 19. Our source
declined to explain why the forecast hasn't been prepared by the
deadline. Perhaps the Minsitry's officials simply can't keep up
with their corrections, because macroeconomic indicators are
deteriorating so fast.
The Economic Development Ministry hasn't revealed any details
about the new version of its macroeconomic forecast. It is very
likely, however, that the previous basic scenario - with oil
prices averaging $50 a barrel in 2009, industrial production
falling by 3.2%, GDP growth slowing to 2.4%, and Russia's currency
devaluing to 34-35 rubles to the dollar - may now become the
optimistic scenario.
Western experts aren't predicting anything good for the
Russian economy either. On January 16, for example, Merrill Lynch
lowered its GDP growth forecast for Russia from 3.7% to 0.9%. This
forecast is based on an average weighted oil price of $50 a
barrel. Merrill Lynch warns that the Russian economy is expected
to contract substantially, and Russia's foreign currency reserves
are expected to run out by 2010. Merrill Lynch maintains that the
Russian government's economic rescue plan is not effective enough,
so Russia is in for "a rough landing."
The Merrill Lynch report states: "Capital outflow will be the
main problem for the Russian Central Bank, and although reserves
are still fairly large, their rapid decline is a cause of
concern." The report notes that Russia may see its first budget
deficit in six years - up to 3-5% of GDP. According to Merrill
Lynch, the Central Bank will be particularly concerned about
capital outflow from Russia and the steady decline of foreign
currency reserves.
The World Bank is warning Russia about the same threats. It
predicts that further declines in oil prices could have disastrous
consequences for the Russian economy. Zeljko Bogetic, the World
Bank's chief economist for Russia, says he doesn't rule out the
possibility of Russia needing to request assistance from
international financial organizations if average oil prices drop
to $30 a barrel in 2009-10.
The United Nations also outlines some pessimistic prospects
for Russia, as a transition economy. In a report on the global
economic situation and the outlook for 2009, the UN presents
several development scenarios for the world economy in the course
of the global crisis. According to the optimistic scenario,
transitions economies can expect their average growth rates to
drop from 6.9% in 2008 to 4.6% in 2009, due to falling prices for
oil and metals and the influence of the global financial system.
But there is also a pessimistic scenario, in which the developed
nations move into deep recession, reducing economic growth in
developing nations to 2.7%.
The European Bank of Reconstruction and Development has also
revised its forecasts for Russia in 2009. Richard Wallis,
spokesman for the EBRD's Russian office, says that GDP growth is
expected to fall from 3% to 2%, "with great potential for further
decline."
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