Bitter forecast: Sharp price decline tears hole in Russia's economy – End of the "growth miracle"

Frankfurter Rundschau Bitter forecast: Sharp price decline tears hole in Russia's economy – End of the "growth miracle" Bona Hyun • 6 hours • 3 minutes read Important source of income affected Russia's economy is threatened with revenue shortfalls from the oil business. This is related to price developments. Putin must now act quickly. Moscow – Not much remains of the Russian economy's "growth miracle." GDP growth could decline due to low oil prices. Russian authorities are preparing for a further decline and must prepare for the lowest prices since the pandemic. For Vladimir Putin, this means: An important source of income for the Russian economy is faltering. Russia's economy must prepare for the lowest oil prices since the coronavirus pandemic. The Russian Ministry of Economic Development has lowered its forecast for the average annual price of Brent crude oil in 2025 from $81.7 per barrel to $68 per barrel. Brent crude is a globally important crude oil grade. A ministry representative announced this, according to the Russian news agency Interfax. According to the Ministry of Economic Development's forecast, the average annual price for Russian Urals crude oil in 2025 will be $56 per barrel. This would be the lowest level since 2020, when the COVID-19 pandemic triggered a collapse in global demand and pushed the Urals price to an annual average of $41.70 per barrel. The ministry's forecasts for the future development of Ural oil prices are cautious: In 2026, the Ural oil price is expected to average $61 per barrel, rising to $63 in 2027 and $65 in 2028. Putin's Ministry Expects Falling Oil Prices – Blow to Russia's Economy Due to Trump The decline in oil prices is due, among other things, to fears of a recession as a result of Donald Trump's trade war. The US president's tariffs caused great uncertainty worldwide: The announcement of the tariffs on Liberation Day briefly caused stock markets to crash and sent the oil market reeling. With the announcement of the US tariffs against almost 200 countries, oil prices have also fallen sharply. The tariffs could also dampen demand for oil in general. In addition to the tariffs, the OPEC+ countries recently agreed to push ahead with their plan to increase oil production. Starting in May, they plan to increase oil production by 411,000 barrels per day. The announcement exacerbated the decline in oil prices. Not good news for Putin and Russia's economy: Budget under pressure due to oil prices For Putin, revenue from oil sales helps finance the war in Ukraine. However, if the global oil price falls, this would mean that Russia's economy would also have to lower its own prices to incentivize trading partners to buy the commodity. However, Putin would then generate less sales, and less revenue would flow into the Russian war chest. The revenue shortfall could put pressure on the budget. Investment banker Yevgeny Kogan estimates that every one-dollar drop in the oil price costs the Russian budget around 160 billion rubles ($1.9 billion) in lost revenue annually. The budget could offset the revenue shortfall from the oil sector with other sources of income. But Putin doesn't have much time or leeway, as he is already planning massive defense spending. Economists therefore warn that the losses from the oil business will be painful for the Kremlin. A $10 drop in the price of Russian crude oil, from $65 to $55 per barrel, could also reduce GDP growth by at least 0.5 percentage points and wipe out about one trillion rubles ($12.2 billion) in budget revenues, says Sofia Donets, chief economist at T-Investments. Putin himself has recently publicly acknowledged alarming signals from the Russian economy. (bohy)