MOSCOW Russia's Economy Ministry has changed its 2016 forecast to predict an economic contraction rather than slight growth and has lowered its average oil price assumption to $40 per barrel, a draft document showed on Friday.
The ministry's base scenario sees gross domestic product shrinking by 0.8 percent in 2016, while a conservative one predicts a 1.0 percent decline, according to the document seen by Reuters.
Two senior Russian governmental officials involved in budget discussions confirmed the authenticity of the document, drafted last month.
Russia is being forced to revise its economic assumptions as a result of a further slide in the oil price -- now below $30 per barrel and well below the $50 per barrel that had been assumed for government planning.
The Economy Ministry now expects an oil price of $40 per barrel in both its scenarios, base and conservative.
The rouble rate is forecast averaging 68.2 per U.S. dollar in the base scenario, and 72.6 in the conservative one.
Under the Economy Ministry's existing official forecast, in the base scenario GDP is predicted to grow by 0.7 percent in 2016 with the oil price averaging $50 per barrel and the rouble averaging 63.3 against the dollar.
Natalia Orlova, chief economist with Alfa Bank, said the new forecast looked more realistic.
"We could see a further decline in oil prices in the first two quarters but then the situation could start to normalise, raising the chances that oil at $40 per barrel will be the average price for this year," she said.
If oil averaged $40, Orlova said she estimated GDP would fall this year by 1.1 percent. GDP is estimated to have shrunk by 3.7 percent in 2015, Economy Minister Alexei Ulyukayev said last month.
The Economy Ministry declined to comment on the draft forecasts but said that new official forecasts are expected to be presented this month.
(Reporting by Moscow newsroom; Editing by Ruth Pitchford and Catherine Evans)
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Updated Date: Jan 15, 2016 23:15 PM