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Friday, December 9, 2016

Is there life at $40 per barrel


Russia needs institutional reform. About it already nobody argues. Oil is volatile in price. The decline in GDP continues, although not as rapidly as last year. Budget sverigebilden. You have to spend the Reserve Fund. Investment was not, and no. The population impoverished. But the government is in no hurry to implement those or other transformations. Fear of a recession. However, Bloomberg experts believe that the impetus for reform can serve as the price of oil to $40. This is the optimal fee low enough to encourage the reformist zeal of officials, and on the other hand, is not so critical to derail the banking and financial sector, to destabilize the situation in the country.


photo: pixabay.com

Now the “black gold” is trading at around $46-47. Bloomberg indicates that so far the crisis has contributed little to the effective action. The Russian government had acted carefully, avoiding broad restructuring of the system and only slightly adjusting their economic policies. However, the Agency believes that to continue to ignore reforms at such a low price of oil will not succeed: “World oil prices at $40 threshold for Russia. Falling below, the authorities are forced to resort to structural reforms, the level of $40 and above sufficient to maintain the current system afloat.”

Timur Nigmatullin, analyst of FINAM, said the “MK” the situation: “I Agree with the experts that 40-45 dollars per barrel is the optimal price. On the one hand, it may push the government to reform, on the other hand, will not push the Russian economy into the abyss. However, much depends on the sanctions. If they are relaxed or removed – we will begin to borrow abroad, thus offsetting the shortfall in revenues. Then even at the low price of oil is conducive to avoiding dependence on raw materials it will be possible to cover the budget deficit, which currently constitutes about 4% of GDP, and relative to live well for another 5-10 years.

To talk about raw dependence of Russia is not necessary. We have a floating exchange rate and no “Dutch” disease, when the appreciation of the real exchange rate of the national currency leads to negative consequences in the form of lower competitiveness. The most important reform that should be undertaken by the government in the near future, is raising the retirement age to 65, which will reduce quasianalogue burden on citizens and the economy as a whole and contribute to its accelerated growth.”

The high price of oil for a long time provided invaluable assistance to the state. One of the achievements of “the fat years” in Russia was the formation of the Reserve Fund and national welfare Fund (NWF). In recent months about this nice “piggy Bank” he remembered and began to spend it. So according to the Finance Ministry, in June, the Reserve Fund declined by 3.7%, to 2,456 trillion rubles, national welfare Fund by 3%, to 4,675 trillion rubles. Vladimir Putin during a “straight line” noted that Russia’s reserves will last for another 4 years, even if they are not replenished. However, Deputy Finance Minister Sergei Storchak said recently that the Reserve Fund may be exhausted by 2017.

Mikhail Belyaev, chief economist of the Institute of stock market and management made possible the emptying of the Reserve Fund in a year: “Now it is necessary to make efforts to fill the budget. While not resorting to external sources. You should develop the domestic economy by stimulating investment process. Only then we will grow the budget, grow the GDP, and the population will live better”.

However, certain measures, where the money to replenish reserves and to maintain the budget at the low price of oil, the government announced.

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