Russia: Sharper contraction and further rate cuts – Standard Chartered

Economists at Standard Chartered Bank lower the 2020 Russia GDP forecast to -5.0% (from -1.5%)and raise the 2021 forecast to 3.5% (from 1.2%). Nordea and Credit Suisse have just released USD/RUB forecasts.

Key quotes

“In light of the scale of the COVID-19 epidemic, and the likely impact on businesses and households of the prolonged lockdown, we lower our growth forecast for 2020 to -5.0% from -1.5% previously.” 

“Assuming no secondary epidemic emerges, the Russian economy should begin to gradually return to normality in H2, although depressed global oil prices will continue to cap oil export revenues. We see stronger growth in 2021 of 3.5% (1.2% previously) due to positive base effects.”

“With a third package of economic support measures due to be announced in early June, we expect the fiscal deficit to widen to 5.0% of GDP this year (from 3.5% previously).” 

“We see scope for more action from the Russian central bank, and now expect a further 75bps of rate cuts, taking the key rate down to 4.75% by end-2020 (versus 5.50% previously).”