Yesterday, we published Russian Economy Monthly - May; fiscal dominance in reverse. Excerpts from the front page are given below.
A year into the recession, the economy is starting to show evidence of bottoming out, but the adjustment is uneven. In a few sectors the adjustment has mostly run its course while others are only midway through.
Fiscal vs. monetary policy. While monetary policy turned a corner with the easing cycle in full swing, fiscal policy (with largely growth-neutral amendments this year) is to enter consolidation in 2016. Coordinating monetary policy is becoming crucial in determining the path of recovery.
Consumption vs. investment demand. Domestic demand nose-dived in early 2015, but as household demand ticked up in non-food categories, investment demand continued contracting, at -7.6% YoY in May.
Corporate vs. retail lending. Corporate lending added another modest increase of 0.5% MoM in May, while retail lending was still in the red as the portfolio continues sliding at -1.0% MoM.
Tradable vs. non-tradable industries. While corporates in select tradable sectors enjoyed record profits, driven by a weaker RUB, non-tradables continued to sink deeper.
Month ahead. Coordination of monetary policy becomes crucial. July will see the discussion over fiscal policy for 2016-18 intensifying, while the CBR’s BoD meeting, scheduled for 31 July, will show how the tight fiscal outlook is influencing the key rate’s normalisation path.