Stocks

POLL-Russia's economic growth to reach 10-yr high despite rate hikes

Credit: REUTERS/LEV SERGEEV

The Russian economy is on track to post its strongest growth since 2011 despite the central bank's attempt to rein in inflation with interest rate increases that will require even higher rates later this year, a Reuters poll showed on Tuesday.

By Andrey Ostroukh

MOSCOW, Aug 31 (Reuters) - The Russian economy is on track to post its strongest growth since 2011 despite the central bank's attempt to rein in inflation with interest rate increases that will require even higher rates later this year, a Reuters poll showed on Tuesday.

Russia's export-focused economy has already recovered to pre-pandemic levels and is on track to grow further, but is at risk of losing pace in the next few years.

The consensus forecast of 18 analysts polled in late August suggested gross domestic product would grow 4.3% this year, its fastest in a decade and an improvement from 3.9% predicted a month ago. Expectations for 2022 growth were raised to 2.6% from 2.4%.

But high consumer inflation and a weak rouble are clouding the outlook, prompting the central bank to tighten monetary policy.

The central bank is now expected to raise its key interest rate for the fifth time this year in September to 6.75% from 6.50%, the poll showed. Some analysts predicted a bigger rate hike of 50 basis points.

By the year-end, the central bank is expected to raise the key rate to 7%, the poll showed, matching analysts' call from a month ago.

Higher rates are designed to tame inflation, a sensitive issue ahead of a September parliamentary election, that is seen reaching 6.0% by the end of the year, above the 4% target and its highest since 2015.

Inflation is expected to slow to 4.1% by the end of 2022, which will give the central bank room to cut the key rate to 6.00%, with forecasts ranging from 5.50% to 7.00%.

The rouble's outlook changed slightly, suggesting geopolitical factors will continue to drag on the currency.

Analysts expected it to trade at 74.00 to the dollar and 89.00 to the euro 12 months from now, compared with forecasts of 73.75 and 86.10 respectively in the previous poll.

Russia's official exchange rates on Tuesday stood at 73.57 per dollar and 86.81 per euro.

Most of the forecasts in the Reuters poll were based on at least 10 individual projections.

(Reporting by Andrey Ostroukh; Editing by Alex Richardson)

((andrey.ostroukh@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Markets Videos

    Reuters

    Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

    Learn More