Russian Economy Less Dependent on Oil Prices – Bank of America

PHOTO by Egor Aleyev / TASS

The Russian economy dependence on oil price fluctuations has declined, Bank of America chief economist in Russia and CIS Vladimir Osakovsky stated, Rambler News Service reported Tuesday.

According to Osakovsky, this is evidenced by GDP data of 2016 with stronger than expected results. In the first quarter of 2016, real GDP of Russia fell by a modest 0.4% in annual terms, with oil prices sliding to $35 a barrel.

A free flow of rouble’s exchange rate plays a stabilising role for the economy, Osakovsky notes. "This helps to offset most of the volatility in oil prices by adjusting the net exports value while improving the profitability of corporations," he said.

But constant oil price changes have a downside on economical sensitivity – in case of increasing world quotes, one should not expect a noticeable GDP growth. "We expect that the impact of a weaker oil this year may also become a limitation," the economist explained.

In early 2017, Russia’s Finance Minister Anton Siluanov said that the country’s economy had already recovered from the "Dutch disease" (economy dependence on the oil prices). He noted, that the share of oil and gas revenues in the budget has already declined in recent years: in 2014, they accounted for 9.6% of GDP, and in 2016 – 5.8%.

Earlier this week, the Russian rouble was named a 'star' of foreign exchange market due to growing oil prices.