Tuesday, July 14, 2009

Russian Economic News Monday July 13, 2009

Summary:

  • Central Bank of Russia has cut the rates to promote lending activity
  • Bank deposits are still high leading to potential liquidity problem

From... United Bank of Switzerland Daily News Report:

Headline: CBR Introduces More Rate cuts

  • CBR Lowered its major policy rates
  • Main reason for change was weakening inflation and completion of the correction period on the currency market
  • CBR Goal: To promote lending activity – fully expected
  • If inflation proceed to fall, CBR will probably continue cutting rates , which experts say are too high

From... Business New Europe Daily News Letter:

Headline: CBR Cuts Refinancing Rate to 11%, Expects Lending to Recover

  • Refinancing rate dropped by 50 pts to 11%
  • Ruble reacted by falling 3%
  • Cut expected by the markets, authorities are certain that inflation will continue to decline at least until the end of summer
  • Cut will not have a rapid and direct effect on lending rates.
  • Nonperforming Loans are still an obstacle to lending recover
  • Weak economic indicators might create deflationary pressure
  • Decline in oil prices could also be prompting a new round of foreign-currency buying
  • If prices keep falling, the ruble will continue to drop

Headline: Budget Deficit Reaches 8.8% in June

  • Federal budget deficit amounted to R277B, 8% of GDP in June 09
  • Revenues increased due to increase in oil and gas revenues and increase in prices
  • Expenditures increased due to increase government support for the financial crisis
  • Budget is expected to exceed 11% GDP due to increase in budget expenditures
  • Further anti-crisis expenditures expected
  • Reserve fund will be the main source of financing

Headline: Reserve Fund Declines $6.4B USD in June

  • The Reserve Fund amounted to $94.9B – a decline from $101B in June
  • Due to an oil and gas transfer
  • Budget situation will become more problematic in 2H09
  • Although oil and gas revenues will stabilize, non-oil revenues will decline and expenditures will increase
  • Will lead to a higher budget deficit

Headline: Bank Deposits with CBR Rose Another 25% in June

  • The growth of the monetary base accelerated to 5.4% MoM from 5.1% in May
  • The breakdown of the base suggests that lending is still not recovering – banks are continuing to accumulate a liquidity overhang
  • Main contributor to growth was commercial banks' deposits with CBR
  • Deposit growth rates suggest that the lending environment is still poor
  • Banks are still unable to transfer state support to the real economy
  • Liquidity overhang is a potential threat to the exchange rate market


 

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