Russian state bank says currency shocks and spending cuts are coming

In its new report, “External Shocks in 2015: Unpleasant, But No Catastrophe,” released today, Russian state lender Sberbank warns that the ruble could face new shocks in the fourth quarter of the year. According to the bank’s analysts, Russia’s currency volatility with the euro and dollar is expected to rise.

“We can’t exclude the possibility of a shock in the currency market in the fourth quarter of 2015,” the report states. “The ruble’s fall may exceed the natural rate of decline that’s driven by the fall in oil prices.”

Sberbank’s experts don’t expect the price of oil to rise above $65 a barrel in 2016, citing the slowdown in China’s economic growth and the rising supply of oil from Iran. The report also anticipates another year of zero consumption growth, as inflation is now decreasing more slowly, and real wages are expected to decline next year.

[Russia’s] exit from the recession is delayed until 2017, but net exports will become a factor in the economy’s growth by early 2016. The need to start economizing government spending will become unavoidable.