Page 6 - RusRPTApr21

countries and GDP growth will run behind that of the global average.
"The growth of main macroeconomic indicators during two consecutive quarters at the end of 2020 technically makes it safe to say that the recession in Russia ended as early as by the beginning of 2021," according to the bulletin dubbed ‘Commentary on state and business’ provided by HSE.
Growth of GDP and investments was reported in Q3 and Q4 2020, the research said. During that period GDP growth amounted to 4.2% and 1.7% quarter-on-quarter, whereas fixed investment grew by 1.2% and 0.4%, respectively, experts said.
The macro-indicators are also returning to normal and posting healthy surpluses. Russia still has a twin trade and current account surplus, both of which will increase this year on the back of rising commodity and oil prices. And Sberbank estimates that the federal budget will return to surplus of about 0.5% this year after posting its first deficit in years in 2020.
Sberbank’s commodity strategy team has upgraded its 2021 oil price forecast to $68/bbl Brent (from $55/bbl). Although a higher oil price clearly has implications for the economy, because of the fiscal rule and currently high geopolitical premium, the bank still expects the ruble against the dollar to average 73 this year. Overall, Sber conclude Russia's finances appear to be in solid shape.
But one soft spot is the ruble exchange rate is being driven almost entirely by geopolitics at the moment. Analysts estimate the fair rate at closer to 68 to the dollar, but most have a discount due to geopolitical tensions and expect the ruble to end the year at about 72-73 to the dollar.
The extra windfall cash will help stimulate economic growth, although the government will remain cautious and probably use part of the extra money to reduce its borrowing plans, rather than spend the whole excess income on stimulus programmes. In addition to the rising revenues the government also still has some RUB1 trillion left over in unspent funds from 2020 to add to the RUB21 trillion spending in the budget.
While the government is still talking about austerity to preserve its cash in the face of a sanctions war with the US, the state has already said it will also up spending from the National Welfare Fund (NWF).
The liquid part of the NWF is already at 7.3% of GDP and is set to grow further. The government is very likely to start investing the sum above 7% of GDP, as per the rules, on infrastructure projects. Sber now expects GDP to increase by 3% in 2021 as a result, which is still a very modest rate all things considered.
6 RUSSIA Country Report April 2021 www.intellinews.com