Page 5 - RusRPTJune18

from 4.5% y/y in March to 5.7% y/y in April currently. The real disposable income has been negative for several year prior to this year’s recovery.
"However, we believe that this uptick is mainly driven by one-off events and will taper off later into the year, coming closer to 3% y/y," VTB Capital suggests.
Renaissance Capital noted that consumer demand "remains in good shape " and forecasts that the indicator could be up by almost 4% in 2018/2019, with a rise in discretionary spending.
"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.
The International Monetary Fund (IMF) keeps its forecast for Russian GDP growth this year steady at 1.7% despite increased pressure from Western sanctions, the IMF's mission chief to Russia Ernesto Ramirez Rigo told the press in May 23.
5 RUSSIA Country Report June 2018 www.intellinews.com