Page 40 - RusRPTDec21

inflation accelerated to 0.18% (from 0.09% the previous week). Annual inflation is at 8.1%.
In the long run, economic forecasts predict inflation will slow and so will economic growth. An updated forecast from the Analytical Credit Rating Agency (ACRA) predicts inflation will approach the 4% target by December 2022, but economic growth will slow to 2% (from 4% in 2021).
A new S&P report also predicts 2.6% growth in 2022, citing low vaccination rates as the biggest threat to Russian economic development. Deputy Economy Minister Polina Kryuchkova does not rule out the possibility that inflation will return to 4% next year, but acknowledges there is a risk that the target will not be reached until 2023.
Nabiullina says the key rate will return to its neutral level of 5-6% no earlier than mid-2023. Oleg Deripaska, Russian businessman and president of the aluminium company Rusal, has repeatedly criticized the CBR, saying it has hampered economic growth.
4.2.2 PPI dynamics
Russia’s producer prices rose +0.4% m/m in October to hit +27.5% year-on-year, Rosstat reported on November 26.
“The main conclusion from the October report is that the dynamics in the consumer-PPI are consistent with the CPI run rate remaining above the CBR's target consistent levels (+0.33% m/m SA) for at least 2-3 months, in our view, approximately at +0.5-0.6% m/m SA,” VTB Capital (VTBC) said in a note.
In September and October, the consumer price inflation (CPI) surge was mainly driven by fruit & vegetables, which is the most volatile component of the CPI basket. Since the consumer-PPI (a good proxy for future CPI) misses fruit & vegetables from its observation, it decoupled from the CPI dynamics during the same period.
“Since then, according to the weekly CPI data, fruit & vegetables have turned the corner, whereas the headline CPI was more in line with the consumer-PPI in November: we expect November CPI to print +0.7% m/m | +8.1% y/y, or approximately +0.55% m/m SA,” VTBC said.
“Although consumer-PPI edged up recently, it stayed notably below the YE20-1H21 levels. This is consistent with the CPI run rate remaining above the CBR's target-consistent levels, at around +0.5-0.6% m/m SA, for at least the next 2-3 months, our calculations suggest,” VTBC added. “Our forecast for YE21F CPI stands at +8.0% y/y, exceeding the CBR's CPI forecast range of +(7.4-7.9)% y/y. The biggest risk to our short-term projections is swings in the prices of fruit & vegetables.”
40 RUSSIA Country Report December 2021 www.intellinews.com