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☆ Russian central bank surprises with sharper-than-expected rate hike to 8.5%
▼ + stars: | 2023-07-21 | by ( ) www.reuters.com time to read: +3 min

"Pro-inflationary risks have increased significantly over the medium-term horizon," the bank said in a statement. The central bank raised its year-end forecast for inflation - now just below 4% - to 5.0-6.5% from 4.5-6.5%, and said it was holding open the possibility of further hikes at future meetings. "The much larger-than-expected 100bp interest rate hike ... underscores policymakers’ concerns about inflation risks," said William Jackson, Chief Emerging Markets Economist at Capital Economics. Alfa Bank Chief Economist Natalia Orlova said the rate hike looked like a reaction to the situation on the currency market, given that the other inflation pressures mentioned had been evident at the previous central bank meeting on June 9. Central Bank Governor Elvira Nabiullina will shed more light on the bank's forecasts and policy in a media briefing at 1200 GMT.

Persons: William Jackson, Natalia Orlova, Wagner, Central Bank Governor Elvira Nabiullina, Alexander Marrow, Andrew Osborn, Kevin Liffey Organizations: Reuters, Capital Economics, Alfa Bank, Central Bank Governor, Thomson Locations: Russia, Ukraine MOSCOW, Ukraine, Moscow

But based on Friday's figures, Russia posted a surplus in March of 181 billion roubles, improving on deficits of 821 billion roubles in February and 1.76 trillion roubles in January. Spending accelerated 34% in the quarter to 8.1 trillion roubles, the preliminary data showed. Overall government income was down 20.8% in the quarter compared with 2022 at 5.7 trillion roubles, led by a 45% dive in energy revenues to 1.64 trillion roubles, the data showed. "The large budget deficit...increases nervousness on the market in relation to the price that geopolitical tensions are costing, and requires efforts directed at improving budget revenues," she said. The central bank has repeatedly warned that the budget deficit poses inflationary risks and may compel it to raise interest rates from the current 7.5%.

Last week's official data showed annual industrial output decline slowed in February, largely thanks to the defence sector, offsetting some of the damage wrought mainly by sanctions on Russia's key energy exports. Russian industrial output fell 1.7% year-on-year in February after a 2.4% drop in January, data from the federal statistics service Rosstat showed. Polevoy estimated that non-defence industrial production shrank about 8% year-on-year, while output of sectors with a high share of state defence orders jumped 36%. The decline in energy revenues has pushed Russia's budget deficit to $34 billion in January-February, compared with a surplus of $4 billion in 2022. LONG-TERM DECLINEAn independent study last month suggested Russia's middle class will shrink as social inequality grows, even if sanctions get relaxed.

☆ Analysis: Russia may hike taxes as military spending, oil price weigh on budget
▼ + stars: | 2023-01-13 | by ( Darya Korsunskaya | ) www.reuters.com time to read: +5 min

"The growing dependence of the budget on oil raises concerns," Alfa Bank said in a note that warned a decline in revenue from gas and oil product exports "looms on the horizon." Analysts say that as the government increased spending by more than a quarter in 2022, in part to finance its military in Ukraine, the oil price required to balance the budget jumped from $67 to $101 a barrel. "When there is a big gap between the actual price (of oil) and the balancing price, it cannot be sustainably covered by borrowing," said Natalia Orlova, chief economist at Alfa Bank. VAT rates, profit taxes and income tax would not be changed, Sazanov said, but other industries may face a higher tax bill. The measures are expected to net an additional 3.6 trillion roubles for the Russian budget over three years.

☆ Russia's more gradual economic contraction to extend into 2023
▼ + stars: | 2022-12-02 | by ( Alexander Marrow | ) www.reuters.com time to read: +3 min

After initially dire predictions of a double-digit GDP slump, analysts and officials have gradually been improving forecasts as the Russian economy demonstrates better-than-anticipated resilience. But the decline will continue at a similar pace in 2023, with analysts now forecasting a 2.5% drop. Over time, economists have acknowledged that the contraction is likely to be less sudden, but more prolonged than first expected. "We cannot rule out a deeper contraction next year when compared with 2022, it could be 5-6%." After a rate hold on Dec. 16, the bank will continue easing monetary policy in 2023, the poll suggested, with the key rate set to end next year at 6.75%.

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