The value of the rouble against the dollar is closely tied to the price of oil, Russia’s main export. The Russian currency depreciates with weaker economic growth prospects and lower oil prices, and vice versa. Moscow wants to weaken this link by putting aside oil earnings above a certain threshold, in order to protect the economy against oil price shocks.
Russia’s gross domestic product increased 2.5 per cent year-on-year in the second quarter of 2017, the fastest growth in five years, as the country recovers from a recession triggered in 2014 by the oil price collapse and aggravated by western sanctions. The forecast reflects changing expectations of growth in 2017. Over the longer term growth is expected to continue lagging behind the world average unless Moscow adopts decisive structural reforms to boost investment.
Revisions to the inflation forecast for 2017 show the effects of monetary policy to bring price growth into line with Russia’s 4 per cent target rate. The slow reduction in inflation expectations has weighed on consumer sentiment, which lags behind the broader economic recovery.
Russia in the second quarter of 2017 posted its first quarterly current account deficit in 19 years – at $300m. The swing came as the services deficit widened and private capital outflows increased. The economy minister expects the quarterly deficit to widen to $5bn in the three months to September 30 although Moscow forecasts a surplus for the whole of 2017 and a smaller one in 2018.