* Central bank mulls possibility of oil price falling to $60
* Price fall would undermine budget and rouble
* Analysts say scenario unlikely but warn of risks
* IMF halves 2015 growth forecast to 0.5 pct
(Changes sourcing, adds comment)
By Lidia Kelly and Darya Korsunskaya
MOSCOW, Oct 1 Russia's central bank said on
Wednesday it is working on measures to support the economy
should oil prices fall by as much as a third or more, showing
growing concern as the rouble slides and Western sanctions take
Punitive measures by the West over Moscow's role in the
Ukrainian crisis have pushed the economy of President Vladimir
Putin's Russia towards stagnation. The International Monetary
Fund halved its growth forecast for 2015 to just 0.5 percent.
The World Bank estimates the economy will expand next year by
only 0.3 percent.
The Central Bank told Reuters it is developing a "stress
scenario" that envisages a drop in the oil price down to $60 per
This would be added to three existing scenarios for the
central bank's policy outlook for the next three years, and
compares with a $100 assumption in the 2015-17 state budget
adopted last week.
"The Bank of Russia is developing a stress scenario with a
significant deterioration in the external economic environment
compared to its (current most pessimistic scenario)," the bank
said in an email statement.
"In the stress scenario, it is proposed to assume even a
more pronounced deterioration in the price of oil, up to the
level of $60 per barrel."
The bank's current most sober outlook envisages oil falling
to $86.5 per barrel by 2017. Its base scenario assumes the oil
price will be above $100 per barrel for the next three years.
Even then, it predicts only modest economic growth.
Oil and gas produce about a half of Russia's federal
government revenues. Already the price of Urals URL-E,
Russia's chief crude blend, has fallen to around $92, while
companies are struggling to raise capital due to Western
sanctions imposed over Russia's actions in Ukraine.
The IMF's mission head to Russia, Antonio Spilimbergo, said
the uncertainty about international tensions present downside
risks to the IMF's already lowered growth forecast.
"There are considerable risks and the risks are related to
the continuation or worsening of the geopolitical situation," he
said. "Uncertainty makes investors very reluctant to invest in
Commenting on the bank's new stress scenario, Finance
Minister Anton Siluanov said that his ministry didn't plan to
adjust its own projections used for budget planning, which he
said factored in a possible oil price as low as $80 per barrel.
"The forecast of the central bank somewhat differs from that
of the government. There is nothing terrible about the fact that
they consider a wider range of possible changes in price
parameters," he said. "I consider ($60 oil) unlikely."
While playing down the likelihood that oil would fall so
sharply, Siluanov has also warned repeatedly that a lower oil
price is one of the biggest risks that the economy faces,
requiring budgetary prudence.
The central bank told Reuters that there is an "ongoing
discussion" about its draft, but the scenario will be included
in the bank's final version of its 2015-2017 monetary policy.
Timothy Ash, head emerging markets strategist at Standard
Bank in London, said the Russian economy would be in serious
trouble if crude fell to $60. This would lead to "deep
recession, large current account and fiscal deficits, huge
levels of capital flight, and significant stress on banks", he
Alexei Kudrin, a former finance minister and influential
figure in the Russian political elite, said recently that he
foresees crude prices continuing to decline over the years ahead
because of new oil production technologies.
In three to four years, he predicted, declining revenues
from oil taxes would create a $30-40 billion hole in Russia's
Some other analysts are also worried that the official
economic projections take too little account of the risk that
oil prices could fall significantly.
"It's prudent policy making. I think it's sensible to
consider a sharp fall in oil prices," said Neil Shearing, chief
emerging markets economist at Capital Economics in London.
Were prices to fall to $60 per barrel next year and stay
there, the budget deficit would widen to 4.5 pct of gross
domestic product, he calculated - a huge burden given Russia's
limited access to international capital markets.
That contrasts with official projections, based on oil
around $100 per barrel, that see the deficit at 0.5-0.6 percent
of GDP in 2015-17.
An added headache for Russia would be the negative shock to
its balance of payments. "One thing that would happen is the
rouble would fall sharply," Shearing said.
"We would start to see the central bank consider more of the
non-standard measures to try to defend the currency. Capital
controls may well come into place... The bigger the dislocation
in markets, the more chance there is of more draconian and
drastic responses from the central bank."
Macro-Advisory analyst Chris Weafer said in a note that the
talk of emergency measures such as capital controls did not
indicate any fundamental shift in policies. Such contingency
planning was normal good business practice and "does not
indicate that the central bank, or the Kremlin, has changed its
position", he said.
Were oil to fall below $75 per barrel, the central bank
could be inclined to back-track on its plans to float the rouble
next year, he said, but added that this scenario was unlikely.
"The main OPEC countries would experience budget difficulties
long before that and would have to take action to cut supply,"
A sharp drop in oil prices may, however, complicate Putin's
"I am not forecasting a collapse in the government in the
next 12-18 months and it's more likely than not that (Putin)
will get reelected in four years time," Shearing, of Capital
"But nothing is forever and a period of much lower oil
prices and the economic pain they would afflict would have big
political consequences in the end."
(Additional reporting by Jason Bush; Writing by Lidia Kelly and
Jason Bush; Editing by David Stamp and Peter Graff)