The fall in Russian GDP last year of 3.0% was better than expected and economists at Capital Economics think GDP will be closer to its pre-virus path than in other EMs by the end of 2022. What’s more,inflation is set to remain above target, prompting further interest rate hikes but there are some doubts that rates will rise as far as most currently expect.

Strong recovery to take place later this year and in 2022

“New virus cases have fallen in recent months and, so long as the outbreak remains under control, we think that restrictions on activity will continue to be eased. Russia’s vaccine rollout has been slow so far but we think it will gather pace and that the most restrictive measures are likely to be eased later this year.”

“We expect GDP to expand by 3.5% in 2021 and 3.3% in 2022. This is above the consensus and we think GDP will be 0.9% lower at the end of 2022 than if the crisis had not occurred. This is a better outcome than most other large EMs.”

“Inflation peaked at 5.8% YoY in March, but we think it will fall only slowly this year and return to the 4% target in early 2022. The central bank’s determination to bring inflation back down is likely to prompt another 50bp of interest rate hikes, to 5.5%, in the coming months. Investors’ expectations for an additional 150bp of tightening by end-2022 appear overdone.”

“The risks are skewed towards more aggressive tightening. Russia’s relationship with the West has deteriorated and the threat of tighter US sanctions has taken its toll on the ruble this year. A lot of news is already priced in, but we think that lingering concerns about sanctions, rising US Treasury yields and a slight fall in the oil prices to $60pb will push the ruble to 80/$ by end-2022.” 


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

GME stock positioned for another short squeeze

Get the full analysis and chart in our Insights. Upgrade to Premium today    

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD loses 1.21 as the dollar extends its gains

EUR/USD has dipped below 1.21, some 70 pips down on the day as the dollar recovers alongside Treasury yields. US Consumer Sentiment beat estimates with 86.4 points. 


GBP/USD retreats amid UK GDP miss, reopening concerns

GBP/USD is hovering around 1.4150, down on the day. UK GDP missed with 2.3% in April and a four-week delay to Britain's reopening is speculated. The greenback is gaining some ground.


XAU/USD drops back below $1900, as US dollar rebounds ahead of data

Gold price has retraced below the $1900 mark once again, having tested Tuesday’s high near $1903. The latest leg down in gold price comes on the back of a tepid bounce staged by the US dollar, as the Treasury yields trim losses across the curve.

Gold News

Ethereum price prepares for a bullish weekend, targeting $3,000

Ethereum price seems prime to revisit $3,000. Although ETH faces resistance at $2,300, the upswing seems imminent. A downswing below $2,000 could invalidate the bullish thesis. 

Read more

Hot Inflation is warming the seat for the June FOMC

Americans are seeing the fastest price increases since their seventh-graders were born as inflation builds into the US economy from the disruptions of the pandemic lockdowns. Core CPI at 3.8% is the steepest gain in 29 years.

Read more