Moody’s: it will be difficult for Russia to recover after the economical collapse

24.07.2015

Russia will be difficult to recover from the economic downturn, while the low oil prices maintain, given the high dependence of the economy on the raw materials sector and the decline in investment, says the managing director of sovereign risk of the international rating agency Moody's, Yves Lemay.

"According to our estimates, oil prices will remain low - I.Lemey said in an interview with Bloomberg. - Without large investments in infrastructure and modernization of equipment, oil production in Russia is unlikely to grow and may begin a slow decline in the coming years."

Ministry of Economic Development estimates that capital outflow from Russia in 2015 could reach $ 90 billion; in 2014 it exceeded $ 150 billion, becoming the record.

Oil production in Russia is higher than the level of 10 million barrels per day for nearly six years, and in January reached the record level of the post-Soviet years. However, imposed sanctions against Russian Federation increased the cost of borrowing for companies and shut down their access to foreign technologies necessary for the development of new and more complex projects in the oil sector.

"Low oil prices together with limited capacities are likely to have a negative impact on the growth prospects of the Russian economy in the coming years" - said I.Lemey.

According Moody's, the average price of oil this year will be $ 60 per barrel, the maximum - $ 65 per barrel.

However, this figure may turn out to be lower, given the slowdown in economic growth in China, the Iranian return in the oil market, as well as the likelihood that US producers of shale oil will be more flexible in the face of declining oil prices than expected, said I.Lemey .

In his opinion, the ruble may again come under pressure amid low oil prices and the risk of another outbreak of the conflict in Ukraine.

The Russian currency rose 5.8% against the US dollar since the beginning of 2015, and its dynamics in this year could be the best among the 24 emerging markets currencies, tracked by Bloomberg. In the past year the ruble fell by almost half.

The Russian economy will fall by 3% this year, and in 2016 it will stagnate, predicts Moody's.

Ministry of Economic Development expects a GDP fall in 2015 by 2.8%, the Central Bank of the Russian Federation - by 3.2%.

I.Lemey noted that Russia has not yet succeeded in reducing the economy's dependence on raw materials production, and a significant shift in this direction would require "substantial investment".

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