Page 8 - RusRPTNov21

tightening cycle for a little longer at the next couple of meetings.
That caused the Central Bank of Russia (CBR) to hike rates by an aggressive 75bp in October as the regulator continues to battle against inflation.
However, real interest rates still not high enough to push households to shift from consumption to saving. CBR officials admit that higher inflation expectations are still pushing the growth in retail lending despite deposit rates adjusting after CBR’s 100bps and 25bps hikes in July and September, respectively.
The government has also decided to prioritize the further accumulation of reserves for infrastructure spending from the National Welfare Fund (NWF), which should be limited (c. RUB1.5trillion over 2021-24, but no more than RUB2.5trillion). The cap on spending in the new 2021-2024 budget from the NWF will be increased from 7% of GDP to 10% which means even more money will be parked in the rainy day fund – an extremely conservative policy.
The Russian government approved a list of 42 strategic initiatives for socio-economic development of the country on October 7. Their aim, according to the official announcement, is “to improve people’s quality of life and make the Russian economy more modern and flexible.”
To arrive at the initiatives, five working groups analyzed 250 ideas and selected those that will respond to citizens’ real needs, provide tangible results, and further national development goals.
The initiatives are divided into six categories: technological breakthrough (15), social sphere (10), construction (7), digital transformation (5), ecology (4), and the state for citizens (1).
The ruble has appreciated vs. the US dollar due to higher commodity prices (especially non-oil commodities) and topped RUB70 to the dollar at the end of October – a level it was not expected to reach until the end of the year. Higher gas prices and the seasonality of volumes should support the ruble in 4Q21.
8 RUSSIA Country Report November 2021 www.intellinews.com