Economic Authority deems trade disputes as threats to the growth of the Russian economic landscape
A heads-up about the economic risks on the horizon, as per the Ministry of Economic Development (MinEc) in Russia! These risks include a rollercoaster ride of trade wars, a potential global economic chill, and tighter sanctions, which could create a perfect storm.
The possible materialization of these external risks could mean a significant drop in demand for Russian exports, according to the document. Yikes!
On the domestic front, MinEc identifies imbalances in supply and demand, increased imports, and untimely transition to loosening monetary and credit conditions as internal risks. If this happens, it could limit the growth of investment activity and expansion of domestic production, even more so when considering persistent structural constraints in the labor market. Ouch!
To account for these risks, the conservative forecast scenario gets a spin. In this gloomy outlook, trade wars escalating and a global economic downturn triggers a decrease in global demand and oil prices. In 2025, the price of Brent crude oil is predicted to be around $58.1 per barrel but plummets to $50 per barrel in 2026 and subsequent years. Under this grumblin' scenario, even the Wall street bear himself would smile – inflation is expected to rev up to 8.2% (way higher than the baseline scenario), and the shackles on economic growth are tight with a meager 1.8% in 2025 and 1.2% in 2026. Cheer up, though! The economy is predicted to rebound, with a growth rate of 2.3% in 2027 and 2.9% in 2028.
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Now, loosely based on enrichment insights, MinEc's conservative forecast suggests a gradual slowdown of the Russian economy due to external pressures but not a deep recession in 2025. For 2026, the forecasted GDP growth is slightly lowered from 2.6% to 2.4%, stepping up to 2.8% and 3.0% in 2027 and 2028, respectively. Despite other analysts and the Central Bank of Russia estimating even slower growth (1-2%), MinEc believes 2.5% growth is realistic.
The reduced oil price forecast is 17% lower compared to the September 2024 estimate, due to global trade tensions, tariffs, and economic slowdown reducing demand. However, volatility in oil prices can stem from uncertainties about U.S. monetary policy and potential easing of sanctions on Iran. Short-covering temporarily pushed oil prices up, but ongoing trade war anxiety and reduced global demand are expected to keep them low.
The impact on inflation isn't explicitly stated, but the slowing economy, trade tensions, and sanctions could create inflationary pressures through supply chain disruptions and import cost increases. However, no specific inflation projection is given in these results. In summary, MinEc conservatively projects a moderated but continuing economic growth amid external challenges, a notable downward revision in oil price expectations, and an implied persistent inflation risk.
- The Ministry of Economic Development (MinEc) in Russia has identified the risks to the economy in 2025, including a potential decrease in global demand and oil prices due to escalating trade wars and a global economic downturn.
- MinEc's conservative forecast suggests a gradual slowdown of the Russian economy in 2025, with a predicted GDP growth of 2.4%, while analysts and the Central Bank of Russia estimate even slower growth.
- The reduced oil price forecast is 17% lower compared to the September 2024 estimate, due to global trade tensions, tariffs, and economic slowdown reducing demand. Short-covering temporarily pushed oil prices up, but ongoing trade war anxiety and reduced global demand are expected to keep them low.
- MinEc's conservative projection implies a persistent inflation risk due to the slowing economy, trade tensions, and sanctions, which could create inflationary pressures through supply chain disruptions and import cost increases, although no specific inflation projection is given.
