Page 29 - RusRPTJune18

"We’ll see how successful the new government could be in achieving the goal of improving potential growth prospects without putting the major priorities of low inflation, fiscal discipline and reserve accumulation under threat," the analysts comment on the main downside risks for short-term growth outlook.
In the meantime the "sound inflation picture with annual inflation still running at 2.4 % in mid-May, implies good timing for some rate cuts," according to RenCap, which is counter-balanced with better consumer demand prospects as well as recent geopolitical tensions and a rise in the Russian risk premium.
Should any interest rate cuts be expected, they are more likely to happen in June, July or September, and not in the fourth quarter or 2019, the analysts believe, and maintain the view that the Central Bank of Russia might cut the rate by 25bp in June and arrive at a 6.75% terminal rate in the third quarter.
To remind, the CBR's board on April 27 resolved to keep the key interest rate unchanged at 7.25% , pausing the monetary easing cycle after the volatility that followed the latest round of US sanctions.
3.2 Macro outlook
Russian gross domestic product is expected to expand by only 1-1.4% in the second quarter in year-on-year terms due to a high base effect in 2017, despite recovery in consumption and industrial output, the central bank said on Monday. Russian GDP returned to growth of 1.5% last year, after two years of recession, on the back of higher oil prices, but was still short of a government target of 2%.
Lower economic activity in March forced the Russian central bank to revise its forecast of gross domestic product growth in the first quarter of 2018 to 1.3-1.5% from 1.5-1.8%, in year-on-year terms, it said in a document
29 RUSSIA Country Report June 2018 www.intellinews.com