In 2020 the Russian economy performance surpassed the world average. The Russian economy decline was 3,1% against 3,5% decrease in global economy. For the first time in the past 30 years, the Russian economy overcame the crisis better than global economy. What can we expect from the Russian economy in 2021?
The IMF expects the economy to grow by 3% in 2021. For comparison, the CBR (Central Bank of Russia) predicts growth of 3-4%. The World Bank is less optimistic. According to its forecast, Russia's GDP growth in 2021 will be 2.6%.
What will determine Russian economic development in this year and what forecast will be the most relevant. We suppose that the future of the Russian economy in 2021 depends on several key factors:
Global energy market dynamic
Oil and gas are the main export commodities of Russia and the Russian budget is heavily dependent on oil prices. The COVID-crisis shows the risks of oil-dependence, but 2021 starts from the fast recovery of oil demand and oil prices. Bank of America is now expecting $70 per barrel. Morgan Stanley has the same prediction. Moreover, the latest OPEC+ deal shows that oil exporters are ready to maintain high oil prices. The RAUIE expects is heavily dependent on oil prices. This also means that the Russian ruble will reach the level of 68-72 rubles per USD this year. This means 5-7% potential recovery potential for the ruble.
Sanction and geopolitical risks
Recent US and EU sanctions against Russia have been toothless due to several factors. First, EU and US have exhausted the possibilities of sanctions without tangible damage to their own economies. Second, Russia has demonstrated its readiness to break off cooperation with the West in many areas. This was unacceptable for the collective West, because Russia is a necessary part of the world economy and global politics. This means that geopolitical risks will decrease this year. This also means opportunities for the ruble to appreciate and Russia's major stock indices to rise.
Vaccination pace
In Russia, 3 vaccines against COVID-19 have been registered and a mass vaccination program was launched in January of this year, but only 3.5% were vaccinated in January and February. This means unsatisfactory pace of vaccination in Russia. However, we do not exclude “mobilization” scenario with fast vaccination, but in general we expect that low vaccination pace may have negative effect on economic recovery.
In general, the RAUIE expects 3-3,5% economic growth this year and ruble exchange rate 68-72 per USD.
Due to the positive situation in global commodity market, the Russian MOEX index may reach 3,500-3,700 points to the end of the year and RTS index may exceed 1,550-1600 points.
However, global inflation and rising commodity prices could trigger a rise in the CPI in Russia to 4.5-6% this year. The CBR (Central Bank of Russia) will keep 4,25% key rate but mey raise it in 4Q. The main signal for key rate increase will be a good pace of economic recovery (higher than 3,5% in annual terms).
The RAUIE has been providing economic and marketing overviews for the Russian and Asian markets over the past 10 years. You can request a consultation or a comment of a specialist from us by filling out the request form on our website or by e-mail office@raspp.ru.
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