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9 Jan 2015
Russia’s super-tight monetary policy might exacerbate the beginning recession – RBS
FXStreet (Barcelona) - Tatiana Orlova, Senior Economist at RBS, explains that oil slump indicates that Russia is entering into a deeper recession and Russia’s super-tight monetary policy will worsen the beginning recession, further anticipating its GDP to fall to -5.5% and inflation to reach 15% YoY in 2015.
Key Quotes
“As the holiday season ended, oil prices resumed their descent to levels not seen in the last 5 years. Brent hit $50/bbl earlier this week. The oil market gloom enhances expectations that the recession Russia is entering now could be deeper than the previous one in 2008-2009.”
“We see headline inflation reaching 15% YoY in spring 2015. With double-digit inflation eating at household incomes, the mad rush to the shops at the end of 2014 to spend cheapening roubles will likely be followed by a deep slump in household consumption in the coming months.”
“We have cut our 2015 GDP growth forecast for Russia to -5.5% from the previous forecast of -2% published in early December. We think that the December RUB crash has severely dented consumer and business confidence. Meanwhile, super-tight monetary policy is likely to exacerbate the beginning recession.”
“Despite the persistent oil price downtrend, we do not expect a repeat of the December RUB collapse in the coming months. Rather than re-introducing capital controls, we think that the government and the CBR will attempt to control the FX market in a “manual mode” via scheduled sales of FX revenues previously hoarded by Russian exporters.”
Key Quotes
“As the holiday season ended, oil prices resumed their descent to levels not seen in the last 5 years. Brent hit $50/bbl earlier this week. The oil market gloom enhances expectations that the recession Russia is entering now could be deeper than the previous one in 2008-2009.”
“We see headline inflation reaching 15% YoY in spring 2015. With double-digit inflation eating at household incomes, the mad rush to the shops at the end of 2014 to spend cheapening roubles will likely be followed by a deep slump in household consumption in the coming months.”
“We have cut our 2015 GDP growth forecast for Russia to -5.5% from the previous forecast of -2% published in early December. We think that the December RUB crash has severely dented consumer and business confidence. Meanwhile, super-tight monetary policy is likely to exacerbate the beginning recession.”
“Despite the persistent oil price downtrend, we do not expect a repeat of the December RUB collapse in the coming months. Rather than re-introducing capital controls, we think that the government and the CBR will attempt to control the FX market in a “manual mode” via scheduled sales of FX revenues previously hoarded by Russian exporters.”