The start of 2Q14 saw more of the same trends observed in the previous quarters – weakening domestic and export demand, deteriorating business sentiment and elevated inflationary pressure. Thus, Russia is slipping into technical recession, but on the positive side this process seems slow and gradual rather than massive and sharp. Also of note, although FX pass-through is yet to push core inflation higher in 2Q14, cost inflation has already started to stabilise, confirming the temporary nature of supply-side shocks.
Vladimir Kolychev, Daria Isakova
VTB Capital analyst
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