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April: waiting for major easing


Economy at a standstill; headline CPI reaches peak. After a year of steady slowdown (real GDP slid from 5% to 2.1% YoY during 2012), Russia’s economy printed almost zero growth in February, being negatively affected by the warm weather and the leap year effect. But every cloud has a silver lining, and we believe that headline CPI likely peaked in February, at 7.3% YoY. We expect the CPI to reach 5.4% by year-end.

Smooth start of the easing cycle. The CBR decided to cut rates on mid-term refinancing tools, highlighting the fragile economic outlook, as well as its expectations that the CPI will return to the CBR’s target range in 2H13. In our view, stronger easing is likely to be implemented in coming months to boost growth.

Very limited rouble upside: we see a slide from here. Recently favourable CA seasonality is to fade, which we believe will mean a weaker rouble as we approach the summer. Hence, even stable oil prices will not lead to a stronger rouble in the coming months, in our view.

Month ahead. Technically, March economic data is likely to recover somewhat from February’s depths, in our view. The key metrics are the CPI and unemployment, we believe. The Duma is scheduled to approve Elvira Nabiullina’s nomination as chairman of the CBR by the end of April, at which time she might offer comments on CBR policy. We also note that President Vladimir Putin is due to deliver his first online conference in this term. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CPI, GDP, Russia, oil

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