Russia Economy May Grow 3% in 2009, 2010 Troika’s Osborne Says

By Halia Pavliva

Feb. 11 (Bloomberg) -- Russia’s economy may expand this year and next because demand for oil, the nation’s biggest export earner, will probably pick up and local products will replace some imports, according to Troika Dialog.

Urals crude, Russia’s main export blend, will probably average about $50 a barrel in 2010, compared with $40 forecast for 2009, said Chris Osborne, chief executive officer for Russian brokerage Troika Dialog’s U.S. unit. The country’s $1.7 trillion gross domestic product may grow 3 percent this year, and accelerate above that in 2010, he said.

“As the ruble devalues we should see some import substitution,” Osborne said at a press briefing yesterday at the company’s Manhattan office. “Russia can grow at $40 a barrel, and at $30 a barrel.”

Russian Finance Minister Alexei Kudrin reiterated on Feb. 4 that the economy may stagnate this year after Urals crude slumped 69 percent from a July record and the global credit crisis pushed up borrowing costs. The ruble slumped 36 percent against the dollar-euro basket since August as oil price fell.

Nouriel Roubini, the New York University professor who forecast the U.S. recession two years ago, said on Feb. 4 that the Russian economy may contract by 3 percent or 4 percent this year. Russia is the world’s biggest energy exporter.

The economy expanded 5.6 percent in 2008, the slowest pace since at least 2004. Russian GDP will contract 0.7 percent this year and grow 3.15 percent in 2010, according to the median estimate of 13 economists surveyed by Bloomberg.

Russia’s economy last shrunk in 1998 as the government defaulted on $40 billion of debt and the currency tumbled.

Urals crude had surged more than 10-fold since 1998 to $104.72 a barrel in April 2008, helping the economy expand more than 6 percent every quarter between mid-2005 and September last year.

Russian stocks may “outperform quite a few markets” this year should global equities stabilize, said Osborne, who recommended investors buy OAO Lukoil. Russia’s dollar-denominated RTS stock index is down 4.6 percent this year after tumbling 72.4 percent in 2008. Moscow-based Lukoil has climbed 12.8 percent this year.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.