SURVEY – Russian economy will slow in 2022, ruble will limit losses
Band Andrey Ostroukh
MOSCOW, December 23 (Reuters) – Russia’s commodity-dependent economy will slow in 2022 as the central bank will have to keep rates high for several months before stubbornly high inflation begins to decline, a Reuters poll found on Thursday.
After declining 3% in 2020, its sharpest contraction in 11 years, the Russian economy has returned to pre-pandemic levels thanks to a rebound in consumer demand and high prices for oil, its main export. But he should run out of steam.
Average forecasts from 19 analysts surveyed in December suggest that economic growth will slow to 2.5% in 2022. President Vladimir Putin said on Thursday that the economy is expected to grow 4.5% in 2021.
“The economy will start to slow after the withdrawal of fiscal and monetary stimuli,” said Sergey Konygin, chief economist at Sinara Investment Bank.
The central bank, which raised the key rate seven times in 2021 from a record 4.25%, is expected to raise it to 9% in the first quarter of 2022. RUCBIR = ECI.
The Bank of Russia is expected to gradually lower the rate to 8% by the end of the year, with forecasts ranging from 7% to 8.5%, according to the poll.
Higher rates are needed to contain stubbornly high inflation which reached 8.4% in November, a level last seen in early 2016 and hovered at 8.2% at the end of December.
“Inflation passed its peak in November and will gradually slow down,” said Kirill Sokolov, chief economist at Sovcombank.
Higher rates can also support the ruble by making it more attractive to invest in high yielding ruble assets.
A drop in geopolitical tensions and the return of foreign investors to Russian assets should also support the ruble, Konygin said.
The poll’s forecast average suggested that the ruble would trade at 71.70 per dollar and 83.40 per euro in 12 months, compared to 72.50 and 84.09 respectively in the previous poll.
“For the ruble to strengthen significantly above 70 against the dollar, inflation expectations must fall considerably, for which inflation must first slow,” said Alexander Isakov, chief economist at VTB Capital.
Most of the Reuters poll’s predictions were based on at least 10 individual projections.
(Report by Andrey Ostroukh with additional poll by Elena Fabrichnaya edited by Mark Heinrich)
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