BOFIT Viikkokatsaus / BOFIT Weekly 2017/29

The IMF kept its forecast for Russia's GDP growth in 2017 unchanged at 1.4 % assuming an average oil price (Brent) of $53 a barrel. Medium-term potential GDP growth is estimated at 1.5 % p.a. assuming no reforms are made. The IMF noted that the current effort to reduce government budget deficits is appropriate for adjusting to persistently lower oil prices. The IMF said expenditure measures should be durable and better targeted (e.g. in social spending) and include pension system reform in order to safeguard growth-enhancing spending on e.g. infrastructure (for Russia's new budget rule, see previous item).

The IMF saw Russia's current monetary policy stance as tight and recommended further easing although gradually as it is possible disinflation may reverse. It also encouraged Russia to elaborate on its inflation target frame beyond 2017 and communicate it to the public. Regarding problem banks, the IMF said bank reforms should make owners to shoulder more recapitalisation, remove obstacles that discourage investors from acquiring assets and liabilities from bank owners, replace central bank financing with federal funding, and otherwise, to tighten rules on related-party lending and strengthen efforts to deal with money laundering.

The IMF noted Russia had taken just some steps of economic reforms in the past year and advocated setting priorities on e.g. property rights, privatisation, labour markets, innovative business environment and stronger trade relations.