Russia’s economy is poised for the “biggest bounce” in the world this year as companies rebuild stocks and resurgent consumer demand boosts output after a record slump in 2009, Bank of America Merrill Lynch said.
The economy of the world’s biggest energy supplier will grow 7 percent this year, David Hauner, head of emerging-market economics at the largest U.S. bank, said in a report published today, raising a previous estimate for 5 percent expansion. The economy contracted a record 7.9 percent last year.
“Russia leads by a wide margin,” Hauner said. “A 7 percent GDP call for Russia looks aggressive, but is it? The comparison with the 1998-2000 episode suggests our revised forecast remains conservative.” Russia’s output won’t match its pre-crisis peak until the first quarter of 2011, according to the report.
Surging demand for commodities and companies’ efforts to stabilize inventories stoked a rebound that’s helping to pull the economy out of its worst contraction since the Soviet Union collapsed in 1991.
On a seasonally adjusted basis, Russia’s GDP gained 6.5 percent in the first quarter from the previous three months, BofA Merrill estimates. This year’s recovery will follow what President Dmitry Medvedev has called the “hardest year” since Russia’s 1998 default.
‘Upward Pressure’
Russia’s economy may expand 4 percent to 4.5 percent this year, more than the government’s official forecast of 3.1 percent, Deputy Economy Minister Andrei Klepach said on March 16. GDP may advance 3.35 percent this year, according to the median estimate of 22 economists surveyed by Bloomberg.
There will probably be “upward pressure on the consensus during the weeks ahead,” BofA Merrill said in the report.
Bank lending will begin to accelerate in the second half after a “credit-less recovery” and loans may grow as much as 30 percent in the second half from a year earlier, Hauner said.
Retail sales rose an annual 1.3 percent in February, the second month of growth, as higher wages fueled consumer spending. The unemployment rate fell for the first time in four months, reaching 8.6 percent in February.
“Initially, the recovery will likely remain driven by exports,” Hauner wrote. “Only in the second half of the year, we expect consumption to pick up more materially on the back of falling unemployment and inflation and rising wages. The biggest bounce, however, should come from inventory restocking.”
Oil Price
Urals crude, Russia’s chief export, has surged more than 97 percent since the end of 2008. An increase of 1 percent in the oil price boosts GDP by 0.1 percent in the first year and adds another 0.1 percent over the next five years as the improving outlook drives capital inflows, according to BofA Merrill.
A 30 percent increase in the price of oil adds 3 percent to GDP after one year and 6 percent cumulatively after six years, the bank said.
Investment growth will reach an annual rate of about 50 percent in the first half, while inflation will decline to 5 percent by the middle of 2010 and will average 6 percent this year, BofA Merrill predicts.
Consumer-price growth last month fell to 6.5 percent, its lowest level since July 1998, after ruble gains suppressed import prices and demand remained sluggish. The annual inflation rate more than halved in March from 14 percent a year earlier.
Russia’s central bank will take advantage of slowing inflation to cut its benchmark refinancing rate to 6.5 percent this year while narrowing the difference with the regulator’s other policy rates, Hauner wrote. The benchmark will rise to 9 percent in 2011, he estimates.
Bank Rossii lowered the rate a quarter-point to 8.25 percent on March 29, its 12th reduction in less than a year.
The economy of the world’s biggest energy supplier will grow 7 percent this year, David Hauner, head of emerging-market economics at the largest U.S. bank, said in a report published today, raising a previous estimate for 5 percent expansion. The economy contracted a record 7.9 percent last year.
“Russia leads by a wide margin,” Hauner said. “A 7 percent GDP call for Russia looks aggressive, but is it? The comparison with the 1998-2000 episode suggests our revised forecast remains conservative.” Russia’s output won’t match its pre-crisis peak until the first quarter of 2011, according to the report.
Surging demand for commodities and companies’ efforts to stabilize inventories stoked a rebound that’s helping to pull the economy out of its worst contraction since the Soviet Union collapsed in 1991.
On a seasonally adjusted basis, Russia’s GDP gained 6.5 percent in the first quarter from the previous three months, BofA Merrill estimates. This year’s recovery will follow what President Dmitry Medvedev has called the “hardest year” since Russia’s 1998 default.
‘Upward Pressure’
Russia’s economy may expand 4 percent to 4.5 percent this year, more than the government’s official forecast of 3.1 percent, Deputy Economy Minister Andrei Klepach said on March 16. GDP may advance 3.35 percent this year, according to the median estimate of 22 economists surveyed by Bloomberg.
There will probably be “upward pressure on the consensus during the weeks ahead,” BofA Merrill said in the report.
Bank lending will begin to accelerate in the second half after a “credit-less recovery” and loans may grow as much as 30 percent in the second half from a year earlier, Hauner said.
Retail sales rose an annual 1.3 percent in February, the second month of growth, as higher wages fueled consumer spending. The unemployment rate fell for the first time in four months, reaching 8.6 percent in February.
“Initially, the recovery will likely remain driven by exports,” Hauner wrote. “Only in the second half of the year, we expect consumption to pick up more materially on the back of falling unemployment and inflation and rising wages. The biggest bounce, however, should come from inventory restocking.”
Oil Price
Urals crude, Russia’s chief export, has surged more than 97 percent since the end of 2008. An increase of 1 percent in the oil price boosts GDP by 0.1 percent in the first year and adds another 0.1 percent over the next five years as the improving outlook drives capital inflows, according to BofA Merrill.
A 30 percent increase in the price of oil adds 3 percent to GDP after one year and 6 percent cumulatively after six years, the bank said.
Investment growth will reach an annual rate of about 50 percent in the first half, while inflation will decline to 5 percent by the middle of 2010 and will average 6 percent this year, BofA Merrill predicts.
Consumer-price growth last month fell to 6.5 percent, its lowest level since July 1998, after ruble gains suppressed import prices and demand remained sluggish. The annual inflation rate more than halved in March from 14 percent a year earlier.
Russia’s central bank will take advantage of slowing inflation to cut its benchmark refinancing rate to 6.5 percent this year while narrowing the difference with the regulator’s other policy rates, Hauner wrote. The benchmark will rise to 9 percent in 2011, he estimates.
Bank Rossii lowered the rate a quarter-point to 8.25 percent on March 29, its 12th reduction in less than a year.
Source: Tasneem Brogger, Chris Kirkham (Bloomberg)
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