Page 6 - RusRPTJan22

1.0 Executive summary
The Russian economy has returned to steady growth in 2021, and the budget is balanced, Prime Minister Mikhail Mishustin said in December at a government meeting.
Russia ended the year on good form with a triple surplus of trade, current account and federal budget and an estimated 4.2% growth – its best result in years.
Booming commodity prices, real income growth, high oil prices and record profits meant the budget was in solid shape too. The trade and current account surpluses also blew through earlier predictions to end the year at all time record highs of an estimated $160bn and $120bn respectively. That fed through to the country’s international reserves, which were also at an all time record high of $630bn, up $33bn over the year.
The fly in the ointment has been inflation which remained stubbornly over 8% at the close of the year but was beginning to fall after the CBR hiked rates at nearly every meeting since March: March (25bp), April (50bp), June (50bp), July (100bp), September (25bp), October (75bp), December (100bp).
CBR governor Elvira Nabiullina began tightening early and Russia is well ahead of the rest of the world in the tightening cycle. Economists belive the last 100bp hike in December to bring rates to 8.5% may the last hike and the CBR will return to cutting rates in the second half of 2022 as inflation falls back to its target rate of 4%.
But as the year came to a close the Russian story was dominated by rapidly rising geopolitical tensions as Russia moved military units up to bases near the Ukrainian border. While the headlines scream “Ukraine invasion imminent!” bne IntelliNews’ take on the redeployment is it was a political move ahead of the two-hour December 7 virtual summit between Russian President Vladimir Putin and US president Joe Biden where Putin demanded talks to start on a new security deal between east and west.
This is a major development and is backed by possible Russian military action in Ukraine and elsewhere if the west does not respond serious to Russia demands for talks on security. While this could well be the worst crisis since the 2014 annexation of Crimea, at the time of writing Biden had conceded to start talks on January 10.
The prospects of the West agreeing to Putin’s demand for legal guarantees that Nato will not expand further east, and specifically lock Ukraine out of the organisation forever, seem unlikely to happen. However, Biden has made it
6 RUSSIA Country Report January 2022 www.intellinews.com