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Macro week ahead – RUB devaluation spillover into October stats


Rosstat is to publish its monthly report for October later this week, while the MPCs in Turkey and South Africa are to take decisions on rates.

The October monthly report from Rosstat is the main heavyweight on the data front this week. Were it not for the RUB devaluation, we would have expected the same bleak picture with a gradual, albeit persistent, erosion of private domestic demand and a slightly more resilient trend on the supply-side of the economy which is helped by import substitution, defence (re-armament) and infrastructure spending. The reaction to RUB depreciation, however, might have distorted the ordinary behaviour of economic agents.

Similar to 1Q14, the latest wave of RUB weakness might have fuelled a pickup in demand for discretionary non-food categories in anticipation of price hikes for imported products. This might provide only a temporary respite for the consumer sector, though, as shrinking disposable income is likely to result in significant cutbacks in discretionary consumer spending. Savings behaviour might also have been affected, with ordinary Russian savers usually looking for refuge in the safety of the dollar and real estate. It will be interesting to see if the banking statistics, also published this week, reveal an uptick in deposit dollarisation (although many might have preferred cash FX and/or offshore bank accounts, if they are concerned about additional sanctions against the Russian banking system).

On the corporates side, if history is any guide, companies might have cut capex outlays more significantly than they otherwise would and set aside more funds for a 'rainy day' (this is also likely to be in FX, rather than RUB deposits/accounts). This type of herd behaviour on the part of households and the corporate sector tends to accentuate trends on the FX market during periods of adjustment to external shocks. Once the dust settles and economic agents return to their day-to-day routine, the currency adjusts to the level needed for the BoP to remain structurally balanced. We consider this level to be around 42–43 over the next 12–15 months, although it is hard to say whether we are already past the short-term volatility.

Vladimir Kolychev
VTB Capital analyst


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