- We revise our 2015 GDP forecast to a 6.2% y/y fall from our previous -7.9% y/y forecast on better than expected Q1 15 preliminary GDP data, a dovish Bank of Russia (CBR) and better prospects for the oil price. We also raise our estimate for 2016 GDP growth to 0.5% y/y from the decrease of 0.8% y/y we previously expected. Our call is more pessimistic than consensus as we do not expect a sharp rise in the oil price nor an immediate recovery in fixed investment.
- We expect the Russian economy to expand moderately in 2016, as the oil price continues its slow recovery, and domestic production gets stronger and substitutes for falling imports. Thus, we expect the current account to see a surplus due to falling imports as the rouble floats freely.
- Upside risks to our macro outlook are a higher oil price, easier monetary policy and the revoking of sanctions, which would improve sentiment. We estimate that if Brent hits an average USD100/bl in H2 15, GDP would contract by less than 2% y/y, finding support from improved private consumption.
- We see the rouble as overvalued given the oil price, and expect USDRUB to converge to an average of 57.00, implying a 12% devaluation against the US dollar from the current level. This would result in the rouble being almost 40% weaker than in 2014 on average mostly due to the lower average oil price and high inflation.
- Geopolitical risk is another significant factor to consider. It could trigger a similar sell-off in the rouble to that seen in Q1 14 and Q4 14.
Recommended Content
Editors’ Picks
AUD/USD: The hunt for the 0.7000 hurdle
AUD/USD quickly left behind Wednesday’s strong pullback and rose markedly past the 0.6900 barrier on Thursday, boosted by news of fresh stimulus in China as well as renewed weakness in the US Dollar.
EUR/USD refocuses its attention to 1.1200 and above
Rising appetite for the risk-associated assets, the offered stance in the Greenback and Chinese stimulus all contributed to the resurgence of the upside momentum in EUR/USD, which managed to retest the 1.1190 zone on Thursday.
Gold holding at higher ground at around $2,670
Gold breaks to new high of $2,673 on Thursday. Falling interest rates globally, intensifying geopolitical conflicts and heightened Fed easing bets are the main factors.
Bitcoin displays bullish signals amid supportive macroeconomic developments and growing institutional demand
Bitcoin (BTC) trades slightly up, around $64,000 on Thursday, following a rejection from the upper consolidation level of $64,700 the previous day. BTC’s price has been consolidating between $62,000 and $64,700 for the past week.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.