UPDATE 1-Russia’s economy minister forecasts 2 pct growth if no shocks

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By Dmitry Zhdannikov

Jan 20 Russia’s economy could grow by 2 percent in 2017 as long as there are no external shocks such as a renewed fall in oil prices, Economy Minister Maxim Oreshkin said on the sidelines of the World Economic Forum in Davos.

The Russian economy shrank by between 0.5 and 0.6 percent last year, according to a preliminary data, due to low oil prices and Western sanctions. Yet, with oil prices recovering thanks to last month’s Russia-OPEC deal on cutting oil output, prospects for the economy look brighter this year.

Oreshkin said Russia would not abandon a free-floating rouble, which was one of the moves taken by the Russian central bank to help the economy in 2014. The policy was aimed at preserving its gold and foreign exchange reserves, which had been previously been used to smooth out rouble volatility.

The central bank could soon start buying foreign currency to help the finance ministry sterilise excessive budget revenues above $ 40 per barrel, Oreshkin said, adding this would not mean Russia would depart from a freely floating rouble.

“There is absolutely no talk about abandoning the (rouble) free-floating regime… It will remain absolutely freely float,” Oreshkin said.

The central bank has a goal to rebuild its reserves back to $ 500 billion, for which it has planned to start buying forex on the market, but has not given a time indication.

On Thursday, the central bank said it may start buying foreign currency if oil prices stay high, but the amount of forex it buys each month would not exceed the additional revenues Russia gets from oil prices which exceed the level it has in its budget plans.

PRIVATISATION

After selling stakes in diamond miner Alrosa, oil companies Bashneft and Rosneft last year and earning more than 1 trillion roubles ($ 16.8 billion) for the depleted budget, Russia planned to further reduce its holdings in a number of assets.

It has planned to sell a 10.9 percent in state bank VTB and a 25 percent in state shipping company Sovcomflot this year.

Oreshkin said that it would be hard to sell a stake in VTB, Russia’s No.2 bank, as the latter is under Western sanctions, while Sovcomflot is “our first task.”

Two sources close to the deal told Reuters last year that a privatisation of a 25 percent stake in Sovcomflot may be equally split between existing and new shareholders, with the operation expected in Moscow this spring.

The Russian economy ministry has previously said it wanted to raise 24 billion roubles from the sale of the Sovcomflot stake.

($ 1 = 59.6361 roubles) (Writing by Katya Golubkova; Editing by Maria Kiselyova and Alexander Smith)