The impact of higher oil prices recirculating throughout the economy is likely to further support domestic demand and thus GDP which is expected to grow by 1.7% in 2018, the European Commission stated in its recent forecast.
The commission expects the growth rate to fall to 1.6% of GDP, reflecting the long-term consequences of Western sanctions.
“Growth is expected to edge down slightly to 1.6% in the outer of the forecast horizon, reflecting subdued productivity growth and lingering effects of sanctions.” European Commission said.
Oil has significantly strengthened in the last week, with Brent benchmark rising above $70 for first time since 2014. It was trading near the $73 per barrel mark, while the US West Texas Intermediate was slipped below $68.
According to Russia Today, real wages in Russia are growing after three years of declines with indexation of public employees’ salaries.
“Uncertainties surrounding the geopolitical situation and the impact of the recent US sanctions of investors’ confidence remain the key downside risk facing the economic outlook for Russia, while higher oil prices and stronger wage growth are the major risks for growth outlook,”the European Commission said.
The EC forecasts inflation in Russia to be 3.7% this year, and 4% in 2019, which corresponds with the target of the Central Bank.