Russian reserve fund may be depleted in 2017

With the Kremlin touting resiliency in the era of lower oil prices, Russia's deputy finance minister said Wednesday the government reserve funds may run dry.

The federal fund declined 3.7 percent in June to around $39 billion, while the national wealth fund lost 3 percent to $73.4 billion. Russian Deputy Finance Minister Sergei Storchak said Wednesday the funds may be depleted by 2017.

"Yes, it is possible," he was quoted by Russian news agency Tass as saying.

A survey last week from the Central Bank of Russia estimates second quarter gross domestic product could decline between 0.2 percent and 0.5 percent. That came as wages rise with inflation, while the pace of industrial output grew by 0.7 percent year-on-year.

"This is indicative of the support the national economy has been receiving from the external demand," the bank reported last week.

Russian finance planners said the 2016 budget was based on oil priced at around $50 per barrel, a price target in line with recent trading sessions. That price is about half what it was two years ago and lower crude oil prices are creating fiscal problems for economies like Russia that depend heavily on energy exports for revenue.

In his last address of 2015, Russian President Vladimir Putin said GDP growth of 0.7 percent is expected for this year. At the time, he warned policymakers the pressure from lower oil prices may be a medium-term problem for the Russian economy.

In June, the president said the Russian economy was "essentially out of recession." His optimism, however, contrasted with analysis from the World Bank that said Russia's economy will shrink by 1.6 percent GDP this year before growth returns in 2017. In a global forecast from the World Bank, Russia was singled out as one of the major economies expected to sink deeper into recession.