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February 2013: weak growth story goes on


GDP growth weakened throughout 2012 to end the year at 3.4% YoY. Stagnating investments and the high-base effect pushed YoY GDP growth to slightlyabove 2.0% in 4Q12, triggering a discussion on how to stimulate growth and meet thegovernment target of 5% YoY growth in the medium term.

Headline CPI increased to 7.1% YoY in January, boosted by one-off factors (key contributors were vodka, railway tariffs, gasoline and tobacco). VTBC core inflation slowed to 5.1% YoY, indicating that underlying inflation continued to soften, with its run rate coming closer to 4% in January 2013 vs. above 6% in mid-2012.

Rising push for easier monetary policy; cuts to start in April. Headline CPI is set to peak in February, and growth is unlikely to accelerate soon, as the banking system and fiscal policy are still a drag on growth. We expect the first cut once headline CPI changes direction.

RUB on upward trend. RUB was supported by stronger oil, foreign inflows in OFZ and CA seasonality. We expect RUBBASKET to reach 34.0 within the next two months; USDRUB will likely go well below 30.0.

Month ahead. February will likely be a dull month and see the continuation of recent trends. Economic YoY growth rates are set to slow even further on the base effect of a leap year. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

GDP, CPI, inflation, ruble

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