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Russian economy to return to 2020 level, cenbank to cut rates - Reuters poll

·2-min read
People rest on benches near a window of business premises put out for rent in Moscow

By Andrey Ostroukh

MOSCOW (Reuters) - The size of Russia's shrinking economy this year will return to 2020 levels, while the central bank will cut rates again this month as inflation projections decline, a Reuters poll suggested on Friday.

Economic forecasts gradually improve after Russia's economic landscape changed drastically when Moscow sent tens of thousands of troops into Ukraine on Feb. 24, triggering sweeping Western sanctions.

The average forecast among 15 analysts and economists polled by Reuters in late August suggested the Russian economy was on track to shrink by 4.7% this year, the same degree by which it expanded in 2021.

A similar poll in July and June had predicted a contraction of 5% and 7.1%, respectively.

Russian officials are even more optimistic, predicting 2022 economic contraction of less than 3% in contrast with earlier assumptions of a drop of more than 12% - which would have been the biggest fall in economic output since years following the collapse of the Soviet Union.

The recovery in economic activity is supported by recovering demand amid a stable job market, Renaissance Capital analysts said.

Official unemployment stood at the record low of 3.9% in July.

Inflation, one of the main concerns among Russian households, is expected to accelerate to 13.0%, from 8.4% in 2021, the poll showed, but below last month's expectations of a 13.4% annual consumer prices increase.

In January, before the conflict in Ukraine began, analysts had on average expected the economy to grow by 2.5% with year-end inflation at 5.5%. Russia targets inflation at 4%.

"The rouble stability, the economic downturn and the seasonal depreciation of fruit and vegetables will contribute to a further slowdown in inflation," said Mikhail Vasilyev, chief analyst at Sovcombank.

The consumer price index dipped for eight weeks in a row.

Lower inflation projections and the need to support the economy with cheaper lending opens the door for a fifth cut to interest rates so far this year. The central bank is now seen cutting its key rate to 7.5% at the Sept. 16 board meeting from 8%.

The rouble, which became the world's best-performing currency this year thanks to emergency capital controls and high commodity prices, is seen easing to 73.90 against the dollar in a year from now compared with 60.40 on Friday

(Reporting by Andrey Ostroukh; Editing by Nick Zieminski)