Russian macro: initial signs of economic transformation
March was the first full month that the Russian economy began its transformation toward an unknown future, which is likely to be more ascetic, less reliant on imports and less open to the rest of the world – at least in the initial stage. It looks as though the impact of the military activity in Ukraine and the mounting sanctions won’t have a one-off effect, as during the initial period of the pandemic in 2Q20, but will last longer. So far, economic statistics show that the economy didn’t collapse, but a few sectors were hit strongly. However economic growth decelerated practically all across the board, including consumption. Therefore, to support consumer lending and consumption overall the CBR, has cut the key rate by 300 bps to 14%, i.e., more than the consensus expectation.
Even though the CBR stopped publishing monthly foreign trade statistics, it can be seen that the inflow of foreign cash was relatively strong. As a result, the ruble appreciated in recent days to around R/$70. At some points, it was even stronger. A too-strong ruble combined with the already accelerating inflation is currently one of the main macroeconomic threats to the Russian economy while it re-establishes itself on a new basis.
Now read on...
Register to sample a report