Autumn might bring shift in growth structure. While investment (the key hurdle in the aftermath of the crisis) is likely to be spurred by faster budgetary expenditures and the favourable base effect – especially after September – household spending, which has been the main driver of growth, will not accelerate, due to cooling on the labour market and in retail lending (on CBR macro-prudential measures). For FY13, we expect GDP to increase 1.7% YoY, with an upturn in 2H13 to 2.0% YoY.
Steady headline CPI implies easing only in 4Q13. Although it is unknown whether the CBR recognised the weakness of GDP in 2Q13 prior to the previous tightening step, we believe that it is too dangerous to tighten further (an on-hold step would also be treated as hawkish, as inflation is falling). However, above-6.0% headline inflation, coupled with the CBR head’s recent rhetoric, implies a high chance of an on-hold decision.
Inflation to match CBR target range in September. This year, Moscow mayoral elections (on 8 September) altered the timeline for regulated tariff increases by shifting the date of hikes from 1 September to 1 August. It is therefore beneficial for YoY inflation in September.
Autumn to yield rouble strength. By the end of September, diminishing seasonal BoP weakness, coupled with heavy CBR FX selling and high oil prices, is likely to imply appreciation of the rouble against the basket, subject to a less challenging global environment.