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Signs of overheating in the Russian economy
Wed, Apr 23 2008, 09:50 GMT
by Lars Rasmussen
There are good reasons to tighten monetary conditions
- How can the Russian authorities address the current situation, and what do we expect? page 3-4
- Economic activity has in fact accelerated amid the global creditcrunch, and real GDP expansion is clearly becoming inflationary, being markedly above its medium term trend page 5.
- Private demand remains the key driver behind the expansion. Retail sales and investments especially in the construction sector have proven very strong, and this feeds into price growth - page 5-6.
- Very high capacity utilisation is fuelling inflationary pressures. Unemployment has fallen rapidly and wage pressures are very high as real wages continue to accelerate - page 7.
- Strong domestic demand combined with rising food and energy prices will bring consumer price inflation to a peak at around 15% y/y in May/June, and producer price inflation to close to 30% y/y - page 8.
- FX reserves have been boosted by the large C/A surplus, which has set new highs in Q1 08, and the capital account surplus is underpinned by a rise in FDI and PI inflows. This increases the demand for roubles - page 9-10.
- The liquidity situation has turned out less negative in Q2 08 than previously expected by the Russian authorities - page 11.
- The ongoing weakness in USD has reduced real effective appreciation of the rouble despite high inflation and some rouble appreciation against its currency basket - page 12.
Published on Wed, Apr 23 2008, 09:50 GMT
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