Press Release: IMF Executive Board Concludes 2015 Article IV Consultation with the Russian Federation
IMF News, August 3, 2015
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- Published: August 3, 2015
Context and recent developments
- Russia entered 2014 with declining potential growth owing to the stabilization of oil prices, stalled structural reforms, weak investment, declining total factor productivity and adverse population dynamics.
- The ongoing slowdown was exacerbated by the dual external shocks from the sharp decline in oil prices and sanctions.
- Authorities' stabilizing measures included:
- Accelerating the move to a floating exchange rate, raising policy rates and increasing FX liquidity.
- Introducing temporary regulatory forbearance and a capital support program.
- Providing some fiscal stimulus and limited wage indexation to support the disinflationary process.
Economic outlook and projections
- 2015 is expected to be a recession year due to the sharp drop in oil prices and sanctions.
- GDP is expected to decline by 3.4 percent driven by a contraction in domestic demand weighed down by falling real wages, higher cost of capital, and weakened confidence.
- Inflation is expected to come down due to the dissipating impact of the ruble depreciation, the limited wage indexation in the budget and the recession.
- Growth should resume in 2016 while inflation continues to decline.
- Medium-term growth is projected at 1.5 percent per year, with a weak recovery as limiting factors behind decelerating potential growth take time to be addressed.
- An increase in geopolitical tensions is identified as the main risk to the outlook.
Executive Board assessment and policy recommendations
- Directors commended policy actions to stabilize the economy and noted pre-existing structural weaknesses.
- Fiscal policy:
- A supportive fiscal stance is appropriate at present given cyclical considerations and available fiscal space.
- Quasi-fiscal operations should be limited and coordinated to avoid an overly stimulative impulse.
- For the medium term, Directors called for a gradual fiscal tightening to adjust to lower oil prices and rebuild buffers.
- Directors welcomed the intention to revisit the fiscal rule so that the oil price benchmark better reflects market developments.
- Need for permanent and credible fiscal measures, including:
- Pension reform.
- Reduction of energy subsidies.
- Better targeting of social transfers.
- Monetary policy:
- Monetary easing should continue at a pace commensurate with the decline in underlying inflation and inflation expectations as external and financial stability risks abate.
- Directors encouraged that the foreign exchange purchase program to rebuild precautionary buffers be consistent with inflation targeting.
- Financial sector:
- Policies have been successful in stabilizing the banking system.
- Support should be targeted to individual banks according to specific capital needs.
- Adjust parameters of the capital support program to strengthen incentives and minimize public sector cost.
- Phase-out regulatory forbearance along with implementation of the capital support program.
- Better align Russia’s resolution framework to best international practices.
- Reduce banking sector fragmentation and encourage competition by stepping up supervision and moving toward adoption of Basel III capital standards.
- Structural reforms:
- Accelerating structural reforms is key to raising potential growth.
- Priority measures should include:
- Strengthening governance and property rights.
- Streamlining regulation.
- Reducing trade barriers.
- Improving transparency and efficiency of public investment.
- Increasing competition in domestic markets.
- Reinvigorating the privatization agenda as market conditions permit.
- Deepening and improving efficiency of the financial system to boost capital allocation and potential growth.
Selected macroeconomic indicators, 2012–16 (annual percent change unless indicated)
- Production and prices:
- Real GDP: 2012: 3.4; 2013: 1.3; 2014: 0.6; 2015: -3.4; 2016: 0.2
- Consumer prices (period average): 2012: 5.1; 2013: 6.8; 2014: 7.8; 2015: 15.6; 2016: 7.5
- Consumer prices (end of period): 2012: 6.6; 2013: 6.5; 2014: 11.4; 2015: 12.5
- GDP deflator: 2012: 7.4; 2013: 7.2; 2014: 8.8
- Public sector (Percent of GDP):
- General government net lending/borrowing (overall balance): 2012: 0.4; 2013: -1.3; 2014: -1.2; 2015: -4.8; 2016: -4.2
- Revenue: 2012: 37.7; 2013: 36.9; 2014: 37.5; 2015: 35.0; 2016: 35.3
- Expenditures: 2012: 37.3; 2013: 38.2; 2014: 38.7; 2015: 39.8; 2016: 39.5
- Primary balance: 2012: 1.0; 2013: -0.6; 2014: -0.4; 2015: -3.8; 2016: -3.0
- Nonoil balance: 2012: -10.8; 2013: -12.0; 2014: -12.6; 2015: -13.3; 2016: -13.0
- Federal government: 2012: -0.1; 2013: -0.5; 2014: -3.3; 2015: -3.9
- Additional federal items: 2012: -10.6; 2013: -10.5; 2014: -11.0; 2015: -11.3
- Money:
- Base money: 2012: 11.3; 2013: 8.0; 2014: 6.3; 2015: 2.3; 2016: 6.4
- Ruble broad money: 2012: 11.9; 2013: 14.6; 2014: 2.2; 2015: 3.3; 2016: 8.6
- External sector:
- Export volumes: 2012: 2.9; 2013: 2.0; 2014: 0.1; 2015: 4.6; 2016: 2.7
- Oil export volumes: 2012: 2.4; 2013: -1.0
- Gas export volumes: 2012: -5.8; 2013: 9.9; 2014: 0.8; 2015: 1.6
- Non-energy export volumes: 2012: 5.6; 2013: 5.7; 2014: 7.6; 2015: 7.0
- Import volumes: 2012: 8.3; 2013: 3.5; 2014: -7.2; 2015: -21.8; 2016: 0.0
- Levels (Billions of U.S. dollars unless otherwise indicated):
- Total merchandise exports, fob: 2012: 527.4; 2013: 523.3; 2014: 497.8; 2015: 374.6; 2016: 404.9
- Total merchandise imports, fob: 2012: -335.8; 2013: -341.3; 2014: -308.0; 2015: -230.0; 2016: -230.5
- External current account: 2012: 71.3; 2013: 34.1; 2014: 59.5; 2015: 60.8; 2016: 78.5
- External current account (in percent of GDP): 2012: 3.2; 2013: 4.5; 2014: 5.5
- Gross international reserves (Billions of U.S. dollars): 2012: 537.6; 2013: 509.6; 2014: 405.2; 2015: 362.4; 2016: 374.8
- Months of imports: 2012: 14.5; 2013: 13.0; 2014: 13.6
- Percent of short-term debt: 2012: 257; 2013: 251; 2014: 320; 2015: 496; 2016: 281
- Memorandum items:
- Nominal GDP (billions of U.S.D): 2012: 2,016; 2013: 2,079; 2014: 1,861; 2015: 1,337; 2016: 1,433
- Exchange rate (rubles per U.S.D., period average): 2012: 30.8; 2013: 31.8; 2014: 38.4; 2015: …
- World oil price (U.S.D. per barrel): 2012: 112.0; 2013: 108.8; 2014: 98.9; 2015: 61.5; 2016: 67.2
- Real effective exchange rate (average percent change): 2012: 1.5; 2013: 1.8; 2014: -8.5
IMF Communications Department; Press Release No. 15/368; August 3, 2015. Executive Board summary transmitted to the Russian authorities.