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Macro week ahead


This week, the key macro news in Russia is the preliminary estimate of BoP in 1Q14, the March CPI report and the set of early indicators (PMIs, rail cargo volumes, electricity output, etc.). There is also a CPI release due from Turkey on Thursday. Also worth watching, we have 4Q13 GDP releases and March PMIs in our CEMEEA universe.

Admittedly for different reasons, the broad macro storylines in Russia and Turkey have converged to some extent over the recent past. Both economies are moderating on slowing local demand alongside elevated inflation fuelled by pass-through from weaker currencies. Though fresh GDP and inflation data to be released this week is likely to confirm this unappealing stagflationary environment across both countries, we note the magnitude of required external and internal adjustment is much smaller in Russia’s case, arguing for a faster stabilisation and disinflation in 2H14 (provided geopolitical risks abate).

In Russia, the 4Q13 growth pace could be 1.1–1.4% YoY given 9mo13 and FY13 figures, and we expect it to be closer to the upper bound. Meanwhile, we expect a 6.8% YoY increase in consumer prices for March. The key driver behind is FX pass-through which spurred fruit and veg. and gasoline prices as well as the hike in minimal vodka prices on 11 March.

In Turkey, the CPI remains under strong pressure from weaker TRY and persistently high oil; so could remain near 7.5–8.0%, similar to the previous six months.

As for the first estimate of the current account in Russia, taking into consideration the latest commentary from the CBR that the current account was at USD 19.7bn in 2mo14 and our calculation that in March it should be near USD 5bn, the 1Q14 reading will come at USD 25bn. Now that capital outflow remains elevated (about USD 65-70bn in 1Q14 on our estimates), the improving trend in the current account gives little comfort for RUB, but when (and if) the rush for savings’ dollarization abates, it should help to stabilise the currency.

Daria Isakova, Vladimir Kolychev
VTB Capital analyst


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