Russian inflation is in focus for 2019 as prices began to rise at the end of 2018 and ended the year slightly above the Central Bank of Russia (CBR) target rate of 4%. However, the World Bank says that inflation will remain low this year and growth will be 1.5%, the same as in 2018, according to the multilateral lender’s January 2019 World Economic Outlook.

The US government has threatened to impose “crushing” sanctions on Russia that are scheduled to be considered in the first quarter. The CBR is already in defensive mode, anticipating severe sanctions with pre-emptive rate hikes in September and December at a time when inflationary pressures remained under control.

"Although economic sanctions tightened, Russia experienced relatively low and stable inflation and increased oil production. As a result of robust domestic activity, the Russian economy expanded at a 1.6% pace in the year just ended," according to "Global Economic Prospects. Darkening Skies," the January 2019 World Economic Outlook by the World Bank.

Russian oil production rose to a post-Soviet record high of 11.16mn barrels per day (bpd) last year on an annual average basis, data from its energy ministry showed on January 2.

The World Bank also predicted that oil prices would average $67 in 2019, which is an increase from the $54 average in December, but less than the $75-plus oil prices average for most of the third and fourth quarter of last year. Even at $67 the oil price won’t hurt Russia’s economy badly as the budget currently breaks even at $50, according to BCS Global Markets. Indeed, a slightly lower oil price will help hold inflation down closer to the CBR’s target of 4%.

"Oil prices are projected to be flat, on average, during 2019-21, at $67 per barrel, potentially limiting fiscal and export revenue increases in oil-producing economies," the World Bank analysts say, adding that the uncertainty of the forecasts is high. "Oil prices averaged $68 per barrel (bbl) in 2018, a touch lower than June forecasts but about 30% higher than in 2017," according to the report, cited by Tass.

In 2020 and 2021, the World Bank expects an increase in the growth rate of Russia's GDP to 1.8%. In October, the International Monetary Fund (IMF) raised its forecast for Russia's GDP growth in 2019 by 0.3%, to 1.8%. The IMF maintained its forecast for GDP growth in 2018 at 1.7%. At the same time, the IMF expects inflation in Russia in 2018 at the level of 2.8% due to moderately tight monetary policy.

The government is considerably more optimistic. While the official growth forecast for 2019 is also a low 1.8%, the state is hoping the first effects of the RUB2 trillion a year May Decrees investment programme will start making themselves felt this year and lead to 3%-plus growth from 2020 onwards.

Amongst the many targets Russian President Vladimir Putin set in the decrees is for Russia’s economic growth to outpace global growth. That task has been made easier after the World Bank predicted that global growth will slow to 2.9% in 2019 in its January economic outlook.