Page 36 - RusRPTMar21

at a faster rate. Still, the bank sees the possibility of a new wave of COVID-19 and accompanying lockdowns as a major risk to growth.
The CBR is likely to revise its macro-projections for 2021.
· The 2021YE inflation forecast is likely to stay unchanged at +(3.5-4.0)% YoY, but average annual inflation will be lifted to +(4.0-4.5)%, reflecting higher inflation trajectory;
· 2021F GDP will be revised upwards to +(2.5-3.5)% YoY on the carryover from last year’s stronger performance and expectations of steeper oil extraction growth;
· the 2021F current account balance will likely stand at USD 54bn on higher oil revenues.
The cross-read for the key rate outlook is that we expect the CBR to
i) signal it remains data-dependent,
ii) confirm that the scope for easing is narrower, as it did in
December,
iii) abstain from issuing more detailed plans from increasing
the key rate.
As implied by our sub-4% inflation projections for 2021 (CPI peaking in February and returning to 4% in May-June), VBTC continue to expect the CBR to keep the policy rate at 4.25% through 1Q22.
Inflation is developing above the Bank of Russia’s forecast and is expected to lie within the range of 4.6-4.9% at the end of 2020. This is largely related to the effect of one-off pro inflationary factors in certain markets and the continuing pass-through of the ruble’s earlier weakening to prices. These factors may exert more prolonged upward influence on prices amid the growth in households’ and businesses’ inflation expectations and supply-side restrictions.
Russia has weathered the coronavirus pandemic better than other countries but its economic growth is too slow to catch up with advanced economies, the International Monetary Fund said February 9. Several factors, including low oil prices and sanctions, led to "lackluster growth" that was
36 RUSSIA Country Report March 2021 www.intellinews.com