Boston, MA -- (ReleaseWire) -- 06/12/2014 -- Core Views:
- We expect inflation to arrive at 5.4% at end-2014, slightly above the Central Bank of Russia's inflation target of 5.0% for 2014, and to average 5.1% in 2015, mainly driven by the government-mandated utility price freeze in 2014-2015. Abating inflation will allow the CBR to cut its main policy rate, from 5.50% at the time of writing to 5.25% in 2014, in a bid to shore up the flagging economy.
- We forecast the Russian economy to grow by a modest 1.9% in 2014 and 2.2% in 2015, as the main driver of growth over the past decade - household consumption - continues to weaken. At the same time, the demand-side measures taken by the government to boost investment will do little to address the supply-side factors weighing on investment, further reinforcing our expectations for subdued growth for the foreseeable future.
- The precarious security situation in the North Caucasus poses a major challenge for the Russian authorities, who are at risk of losing control of this vital region. The Kremlin has few good options, and will most likely maintain a combination of repression and federal subsidies, but tough security policies will create a backlash that could undermine its position further.
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Major Forecast Changes
- While we have long maintained a bearish view on the Russian rouble, its recent rapid depreciation has led us to revise further our already downbeat outlook. As such, we have recently adjusted our 2014-2015 outlook for the currency, and now we expect the exchange rate to average RUB35.20/US$ in 2014 from RUB33.16/US$ previously, and RUB35.55/US$ in 2015 from RUB34.10/US$ previously.
Key Risks To Outlook
Unless we see strong moves towards liberalisation of the economy, we remain sceptical that Russia can change its current consumption-centred commodity-dependent growth model into an investment-oriented one. The diminishing windfall from oil and commodity prices will put into sharper relief the structural impediments to investment, such as...
The Russia Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Russia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market..
An influential new analysis of Russia's economic, political and financial prospects through end-2017, just published by award-winning forecasters, Business Monitor International (BMI).
- Forecast the pace and stability of Russia's economic and industry growth through end-2017.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
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