OREANDA-NEWSThe World Bank (WB) in the next report on the Russian economy named the key external and internal risks that the Russian economy could face in 2019. If some of them materialize, GDP growth in 2019 may not even reach the low 1.2%, which the WB predicts.

1.Sanctions and oil prices

Last week, international prices for Brent crude fell below $ 60 a barrel. (almost 20 percent drop from recent highs). On Friday, June 7, Brent quotes adjusted to close at $ 63.29 a barrel. The World Bank predicts a rise in the average price for the Brent, WTI and Dubai brands in 2019 to $ 66 a barrel, but notes risks for the forecast. Downside risks are associated with weaker than expected global demand and further growth in shale oil production in the United States.

2.Excessive credit growth
According to the Bank of Russia, as of May 1, 2019, the consumer loan portfolio grew by almost 24% compared to a year ago. Last week, Economy Minister Maxim Oreshkin warned that because of a possible bubble in the consumer credit market, the risk of a recession in 2021 increases. "The rapid increase in the pace of retail lending could jeopardize financial stability if the macroeconomic situation deteriorates", confirms the WB.

3.“Uniform Rules for All”
The implementation of large-scale national projects is another risk for the state economy, which made a big bet on them. Investment growth will depend on the successful implementation of public infrastructure projects, the WB notes. At the same time they point out that effective implementation will depend on whether the authorities will be able to provide “uniform rules and conditions for all”.  In this context, the WB lists its recommendations:

It's necessary to improve the conditions of competition for state contracts: for example, in the road sector, it would be possible to significantly improve cost efficiency by revising the construction procurement methods, “creating a more commercially oriented federal road agency”.