Ranking officials in the International Monetary Fund predicted a boost to the global economy from lower oil prices as former Russian finance minister Alexei Kudrin warned of a “full-fledged” crisis in the country.
A 46 per cent drop in the price of oil since June is one of several pressures on the ailing economy of Russia, whose incursions in Ukraine have led to European and US sanctions.
As those penalties bite, president Vladimir Putin made plans for emergency talks by phone on Monday with the leaders of France, Germany and Ukraine in another attempt to resolve the stand-off over Ukraine.
In a blog, IMF chief economist Olivier Blanchard and a colleague said declining oil prices should persist and could boost global economic activity by up to 0.7 percentage points in 2015 .
“Overall, we see this as a shot in the arm for the global economy,” said Mr Blanchard and Rabah Arezki, head of the IMF commodities research team.
“Risks to financial stability have increased, but remain limited. Currency pressures have so far been limited to a handful of oil exporting countries such as Russia, Nigeria, and Venezuela. Given global financial linkages, these developments demand increased vigilance all around.”
The boost would be between 0.3 and 0.7 of a percentage points above IMF’s baseline world growth forecast of 3.8 per cent from October.
Saying a mechanical effect of the oil price decline is likely to be a fiscal deficit in most oil exporting countries, the IMF officials noted that energy accounts for 25 per cent of Russia’s GDP, 70 per cent of its exports and 50 per cent of federal revenues.
“While the decrease in the price of oil is only one of the reasons behind the fall of the rouble, the Russian currency has depreciated by 40 per cent so far this year, and 56 per cent since September.”
The IMF assessment came amid another rocky day on financial markets for Russia in which:
The rouble firmed to a 10-day high against the dollar and euro as exporters sold foreign currency revenues, both to meet tax obligations and in response to demands from Mr Putin. Having risen 5.5 per cent against the US currency at 55.33 in mid-afternoon, it slipped back later to 55.99.
The Russian central bank provided the first bank bailout of the rouble crisis, rescuing mid-sized lender Trust Bank to the tune of $540 million.
The Kremlin also moved to intensify grain exports with plans for a new duty on shipments to defend domestic bread supplies against the currency’s drop. Russia expects to be the world’s fourth-largest exporter this year on foot of record exports as the rouble attracts buyers.
Russian state oil giant Rosneft made a big debt repayment but scrapped a deal to acquire an oil trading business from Morgan Stanley as US regulators refused to clear it.
Mr Kudrin, a figure of authority who resigned in 2011, is credited with building Russia’s $170 billion sovereign wealth funds. Warning that Russian debt could be downgraded to junk status in 2015, he said the country’s present troubles had their primary roots in western sanctions of Ukraine and not the price of oil.
“Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly,” he told reporters.
“The government has not been quick enough to address the situation. I am yet to hear its clear assessment of the current situation.”
Mr Kudrin forecast a series of defaults among medium and large companies. While saying banks would probably be supported by the state, this would be likely to result in rating agencies downgrading Russia’s debt.
“Russia will get a downgrade,” Mr Kudrin said. “It will enter the ‘junk’ territory.”
