Page 7 - RusRPTFeb21

Current account surplus will rise by 50%+ in 2021. Analysts forecast that the state of Russia’s external accounts will see significant improvements in 2021 as Russian and global economies return to growth from 2Q21, which is likely to be accompanied by stronger demand and more stable commodity prices.
Analysts expect c/a surplus to rise to $46bn in 2021 – the actual number could be even higher if crude oil prices remain at current levels and the global economy posts a faster recovery. However, Russia will continue to post capital outflows (c$30bn in 2021) as the country’s corporate and financial sectors continue to shrink their external debt leverage.
Consumer prices rose by 0.8% m/m in December, up from growth of 0.7% in November and 0.4% last December according to preliminary estimates.
As a result, y/y inflation reached 4.9% in December. The most significant growth in both m/m and y/y terms was registered in food prices, which were up 1.5% m/m and 6.7% y/y (they rose a respective 0.7% and 2.6% in December 2019). Prices on non-food items rose 0.4% m/m, resulting in 4.8% annual growth (compared with 3.0% a year ago). Service prices also added 0.4% m/m, but in y/y terms they were up just 2.7% (versus 3.8% a year ago).
The weaker ruble and an increase in prices on agricultural products (due to higher global prices and ruble depreciation) were important factors driving inflation higher in 4Q20. However, as the effect of these factors should start to fade away in 1Q21, analysts expect inflation to start decelerating in 2Q21.
Rate cuts are considered over for the meantime as inflation rose strongly towards the end of the year. However, they could resume in the second half of the year.
On the production side, the industrial sector saw a significant improvement in December 2020, almost closing the contraction gap (-0.2% y/y in December 2020 vs. -1.5% y/y in November 2020 and -5.7% y/y in October 2020). IP appeared to outperform consensus, MinEcon and our expectations (-3.9% y/y) by contracting 2.9% y/y (-2.5% y/y in 4Q20 vs. -4.8% y/y in 3Q20 and -6.7% y/y in 2Q20).
In 2020, federal budget deficit reached 3.8% of GDP, according to preliminary estimates by the Finance Ministry. Last time the deficit was close to this level was in 2010 (-3.9%). In nominal terms, deficit stood at RUB4,102bn ($57bn). In 2020, budget expenditures totalled RUB18.7
7 ​RUSSIA Country Report​ February 2021 ​ ​www.intellinews.com