2021-06-15-牛津经济研究院-Russia_Persistent_price_pressures_justify_front-loaded_hikes_4页_508kb

Analysis Summary: Russia's Economic Situation

• Overview: The report highlights persistent inflationary pressures and a supportive stance from the Central Bank of Russia (CBR) for aggressive monetary tightening due to a near-complete economic recovery post-pandemic.

• Economic Recovery: Russia is experiencing a V-shaped recovery, with mobility and economic activity returning to pre-pandemic levels. Key indicators include:

  • GDP growth: Y-o-y increase in March 2021 month matched April 2020 month, offsetting lockdown base effects.
  • Labor market: Unemployment rate low at 5.2%, employment at 71.2mn, wages strong with 8.4% nominal wage growth y-o-y.
  • Consumer spending: Retail sales rebounded sharply, with other sectors showing recovery.
  • Government view: CBR officials state economic recovery is nearly complete by mid-2021, returning nominal GDP to pre-pandemic levels.

• Inflation Trends: High inflation persists, driven by supply-demand mismatches and lingering pandemic-related disruptions. Inflation reached 6.0% y/y in May 2021, exceeding expectations, with core inflation following suit. Inflationary expectations remain elevated.

• Monetary Policy: The CBR has shifted to hawkish tightening, having raised the policy rate by 75bps. Officials support front-loaded hikes, suggesting:

  • Potential for additional 50bps hike at the next meeting.
  • Rate could plateau near 6% by Q3.
  • Objective to bring real interest rates into positive territory and curb demand spikes.

• Other Economic Factors: Challenges include credit boom (mortgage and unsecured lending growing rapidly) and the holiday period enhancing demand. Rouble rally provided initial inflation relief, but other factors like cost pressures sustain concerns about long-term inflation de-anchoring.

• Policy Perspectives: Government and CBR officials emphasize simultaneous monetary and fiscal tightening to prevent overheating, though risks like investment slowdown and sector bubbles are noted.

• Inflation Outlook: Forecasts suggest persistent price pressures justifying further tightening, with revised end-year CPI projections from 4.7%-5.2% to higher levels, potentially leading to a pause for evaluation.