Russia’s economy minister warned that the nation is facing years of oil prices at about $50 as a sluggish global economy ushers in a long cycle of low commodities prices.
The world’s largest energy exporter must continue financial support for non-commodities exports to buoy the nation’s shrinking economy, Alexei Ulyukayev told a conference Wednesday in Moscow. Measures to help growth by encouraging local food production are starting to pay off, according to First Deputy Prime Minister Igor Shuvalov.
“We have entered a period of low prices for commodities, a long commodities cycle that’s ongoing and that will continue for a number of years,” Ulyukayev said. “I don’t see any sharp slumps but, relatively speaking, the oil price will be $50, $50 plus for years.”
Faced with the oil-price weakness and sanctions over the crisis in Ukraine, Russian officials are searching for ways to steer the country out of its longest recession in two decades. Consumers are enduring the brunt of the crisis: September retail sales sank the most since 1999, while wages and disposable incomes also shrank. The ruble, the world’s fifth-worst performer in the past year, has tracked Brent oil’s 15 percent recovery from August’s six-year low.
Shuvalov told lawmakers that the economy “isn’t in tatters,” and that the situation is “fully under the government’s control.” Replacing imports with domestically produced Russian goods after the government banned food from the European Union and the US “have begun to work,” he said.
Deputy Finance Minister Maxim Oreshkin went further, saying Russia’s “crisis, as such, has ended” as foreign capital starts to return.
“We see a resumption of syndicated lending, inflows of capital to units of foreign businesses and investment in Russian bonds,” Oreshkin told another conference on Wednesday.
Even so, “Russia’s economy isn’t at a level where it can feel comfortable,” and “growth needs to shift from non-tradable sectors such as finance, construction and services into tradables.”