OECD: More gloom for eurozone, better perspective for Russia in 2012

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A deepening debt pit in the euro zone will drag its economy down 0.1% in 2012, according to the Organization for Economic Cooperation and Development (OECD). Russia, however, promises a more rosy picture, with its GDP growth backed by high oil.

OECD revised its previous euro zone forecast of 0.2% growth, as its member states continue posting disappointing news. Economies in Spain and Italy may contract 1.5% each this year, while Greece and Portugal will shrink 5.3% and 3.2% accordingly, the body says.

The warning message almost replicates the International Monetary Fund's (IMF) woes of last month. Just like the IMF, the OECD has become more concerned, as the likelihood of Greece leaving the euro has significantly increased.

"If Greece exits the eurozone it would have tremendous consequences that are underestimated by most observers," OECD Chief Economist Pier Carlo Padoan said in an interview with the Wall Street Journal. "We don't compute the probability of a Greek exit [but] it's higher now than six months ago."

The revision was made right ahead of a European summit scheduled for this week to discuss the region's financial crisis.

But Russia-wise, the OECD sounded more optimistic. It said the country’s GDP will speed up in 2012, growing 4.5% compared to 4.3% in 2011. Inflation should also fall this year to 4.6%, down from 8.4% a year ago.

Better figures from the OECD mainly rest on the assumption that oil prices will remain high, which should be used by Russia’s authorities to consolidate the country’s budget. The organization believes that the average oil price will remain at $115/bbl in 2012 or somewhat above that. Given a huge non-oil budget deficit that currently stands at 10% of its GDP, it is essential for the Russian government to revise the balance of income and expenses now, when they sill enjoy a huge flow of “oily money,” OECD concludes.