The Bank of Russia has included Urals oil at $ 25 per barrel in its risk scenario and economic recovery only after 2023. At the same time, the main factors influencing the forecasts of the Central Bank were the prerequisites for GDP growth rates and geopolitics.

The Bank of Russia presented four scenarios for the development of the Russian economy in 2021-2023: the baseline and three alternative ones, reflecting possible risks. The scenarios are contained in the draft Guidelines for the unified state monetary policy for 2021 and the period 2022 and 2023.

When constructing the scenarios, the Central Bank was not guided by the oil price as the main factor, as it was before. Other factors have come to the attention of the regulator, in particular, the impact of the spread of coronavirus on the economy. Due to the COVID-19 pandemic, the Russian economy has faced "an unprecedented combination of external and internal shocks, the impact of which is currently difficult to assess fully," the regulator said. According to the Central Bank, the spread of the virus is still unpredictable, and macroeconomic forecasts are more dependent on various preconditions regarding the scale and timing of its end, as well as appropriate control and prevention measures. “If in previous years the oil price was the key prerequisite, now the situation has changed,” Central Bank Deputy Chairman Alexei Zabotkin said at a press conference.

In the draft, the regulator indicates that the “key fork” in the Central Bank's scenarios is now the prerequisites for the growth rates of actual and potential GDP in the Russian and world economies over the forecast horizon. "In the risk scenario, which is part of the alternative scenarios, a significant impact on the parameters of the forecast of geopolitical factors is also expected," the document says.

The baseline scenario assumes that in 2021-2022 there will be a recovery growth in consumer and investment demand due to soft monetary policy and government measures to support the population and business. The regulator expects growth in demand for loans - at the level of 7-11%, and the population will be more active in lending than companies. The level of budget support will gradually decrease - from 2022, the level of expenditures will correspond to the parameters of the budget rule. Limitations due to the epidemiological situation will remain "to some extent" until the end of 2020 with a further phased cancellation. The average price per barrel of oil of the Russian export grade Urals, according to forecasts of the Central Bank, will amount to $ 38 in 2020, prices will return to $ 50 per barrel only by the end of 2022 - the price recovery will be slow due to the gradual easing of restrictions under the OPEC + agreement and an increase in production outside of it. By the end of 2020, GDP will decrease by 4.5-5.5%, in 2021 the recovery growth will be 3.5-4.5%, in 2022 - 2.5-3.5%. The economy should reach the pre-crisis level of the first quarter of 2020 in mid-2022. Inflation by the end of 2020 is expected to be 3.7-4.2%, in 2021 - 3.5-4%.

The pro-inflationary scenario provides for a slow reduction in budget spending, with a return to the parameters of the budget rule only by 2023. Consumer and investment activity will be constrained by "a moderate tightening of monetary policy." Inflation will reach 4.5-5% in 2021, and will drop to 4% in 2022. GDP growth in 2021 will amount to 3-4%, in 2022 the growth rate will decrease to 1.5-2.5%. The impact of the pandemic on global trade will be more significant than in the baseline forecast - it will lead to a deeper drop in the potential level of global output. In this regard, the average price for Urals oil may decrease from $ 38 per barrel in 2020 to $ 35 in 2021.

The disinflationary scenario can be realized if the developed vaccines against COVID-19 cannot stop the spread of the virus in the world. In this case, oil prices will drop to $ 35 in 2021 and reach $ 50 per barrel beyond the forecast horizon, even despite the extension of the OPEC + agreement. The recovery growth of GDP under this scenario in 2021 will be weak - 1.5-2.5% with an acceleration to 2-3% in 2022. The economy will reach the pre-crisis level only in the first quarter of 2023.

Consumer activity of the population will not be able to return to pre-crisis levels - due to the fact that the population has changed preferences during the pandemic, and also because of the "increased propensity to save." People will be afraid to be left without funds if new restrictive measures are introduced, the Central Bank explains. The continued uncertainty will hold back the companies' investment plans. Lending to both organizations and the population will slow down. In this scenario, the authorities will return to compliance with the parameters of the budget rule in 2022. Inflation in 2022 will go well below the 4 percent target - by 2-3%.

The Central Bank's risk scenario is the most negative of the four. It envisages that the protracted nature of the epidemic will be accompanied by an increase in trade contradictions and geopolitical tensions. In this case, the average price per barrel of Urals will fall to $ 25 in 2021 and in 2023 it will be still lower than in 2020 - $ 35. GDP growth in 2021 will be near zero - 0-1%, dynamics will be weak in the next two years - 1-2% in 2022 and 1.5-2.5% in 2023. Thus, the Russian economy will not be able to reach the pre-crisis level of the first quarter of 2020 until the end of 2023. Sustained economic recovery will be hampered by suppressed consumer sentiment and weak household consumer activity. Inflation will rise sharply to 5.5-6.5% in 2021, and in 2022 it will be 2-3%.

This year, the scale of the shock associated with non-oil factors turned out to be much more significant than the oil shock, Natalia Orlova, chief economist of Alfa-Bank explains the refusal of the Central Bank from oil prices as the main guideline in the formation of scenarios. “In addition, when we switched to a floating exchange rate, the Central Bank explained this transition by the fact that now we can be less worried about the external factor of the trade balance, in particular, the price of oil. In this sense, the actions of the regulator are combined,” she adds.