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Key events are CBR monetary policy meeting and economic policy meeting

This week, the CBR holds its regular monthly meeting on monetary policy and by 15 May Igor Shuvalov and Elvira Nabiullina are to propose changes to economic policy that will be discussed at the meeting with President Vladimir Putin. Also, the week is to contain a number of data releases: April statistics on non-CIS imports (customs, likely at the beginning of this week), the sales of new passenger cars (AEB, 13 May) and the federal budget balance (MinFin, 14-15 May). The CBR is due to publish the external trade balance for March (16 May), while Rosstat is to release its weekly report on the CPI on Wednesday and probably the first estimate of GDP growth in 1Q13 (17-20 May).

CBR Board meeting. An up-tick in headline CPI and improving economic data for March might push the regulator to postpone repo rate cuts until the summer. However, it is too early to infer any sustainable recovery as the March improvement was mostly technical, and the increase in headline CPI in April is temporary, mostly driven by the earlier acceleration in vegetable prices. Hence, we are keeping our forecast of a 25bp rate cut in all key rates unchanged.

President to chair meeting on economic policy. Along with the additional push towards a better business climate and infrastructure spending, we are likely to see decisions to limit the growth in regulated tariffs and curtail borrowing costs for businesses.

GDP in 1Q13. We expect a reading of 1.5% YoY. The deterioration in net exports and almost stalled investment in 1Q13 are to be a drag on GDP growth, with consumption likely to remain the only growth factor. Overall, we expect the low pace of growth in 1Q13 (which was hurt by a couple of one-off factors) to mark the bottom for this year and then see it rebound gradually on the back of the favourable base effect and policy stimuli. 

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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