PARIS (AFX) - Russia could encounter major inroads in its budget surplus and
current account balance if oil prices were to fall substantially, the OECD warned.
The OECD predicted in its twice-yearly Economic Outlook report that Russian economic growth, fuelled by domestic demand, should fall to 4 pct this year from 5 pct in 2001.
In 2003, it said, large public sector wage increases and "repression" of energy and transport prices ahead of legislative and presidential elections should stimulate domestic demand that could spur an increase in momentum to 4.5 pct.
The OECD added, however, that it is unlikely such demand could sustain real GDP growth at its current pace beyond 2003. As a result, momentum is expected to fall back to 3.5 pct in 2004.
The organization said domestic demand and a stronger exchange rate would continue to stimulate import growth, thereby cutting into Russia's large current account surplus.
The surplus, projected to come to 27.5 bln usd this year, should narrow to 18.5 bln in 2003 and 10 bln in 2004.
At the moment, surpluses in both the budget and the current account should serve as a buffer if oil prices were to fall, according to the OECD.
The report warned, however, that in the medium term "there is an increased risk that a large fall in oil prices could lead to serious fiscal and current account imbalances."