By Andrey Ostroukh
MOSCOW (Reuters) – A mix of economic contraction and subdued inflationary risks will allow Russia to cut interest rates again this year, paving the way for a stronger rouble and an economic recovery in 2021, a poll of economists and analysts showed on Monday.
Russia took a hit from lower oil prices and the global coronavirus pandemic, which led to lockdowns that sparked a full-scale economic crisis, prompting the central bank to slash rates.
Russian markets have also come under pressure this month in the wake of the political crisis in neighbouring Belarus as well as over the suspected poisoning of Kremlin critic Alexei Navalny.
The consensus forecast of 21 analysts and economists suggested the central bank may lower its benchmark rate to 4% as soon as September although it may also opt to keep the rate at 4.25%.
“Increased volatility on the debt and currency market raises the probability that the Bank of Russia will take a pause at the Sept. 18 rate meeting,” said Kirill Sokolov, chief economist at Sovcombank.
“If the geopolitical background stabilises, the Bank of Russia may lower the key rate by 25 bps to 4%.”
The poll suggested that the key rate would then stay at 4% through 2021.
Inflation is seen finishing this year at 3.7%, the same as in the late-July poll.
The main impact of rate cuts will take several months to show, but should help the economy recover in the future.
In 2020, the oil-dependent economy will contract by 4.7% before returning to growth in the second quarter of 2021. In the whole of 2021, the economy will grow 3.2%, the poll showed. The previous monthly poll predicted a 4.3% contraction this year and 2.7% growth next year.
Most of the forecasts in the Reuters poll were based on at least 10 individual projections.
The rouble outlook against the euro worsened slightly and was largely unchanged versus the dollar but the currency was still expected to firm up from current levels.
“We believe that in the next 1-2 weeks the rouble will return to 72-74 versus the dollar,” BCS Brokerage said, keeping its year-end forecast at 69.6.
The poll showed the rouble was expected to trade at 70.33 to the dollar and 82.73 to the euro 12 months from now. The previous poll foresaw exchange rates of 70.50 and 81.67, respectively.
On Monday, the rouble’s official exchange rates, set by the central bank, were 74.64 per dollar and 88.74 per euro.
(Reporting by Andrey Ostroukh; Additional reporting by Elena Fabrichnaya; Editing by Hugh Lawson)
