Summary:
- The Ministry of Finance is going to increase excise taxes to help finance the budget; problems might arise from tax collection rates
- Central Bank feels that small banks are setting deposit rates too high, which increases the costs the loans and the potential of bad asset accumulation
- Mixed news on Inflation, but generally positive – inflation at the beginning of the month at .2%, but CBR expects it to be 0% for the month
From... United Bank of Switzerland Daily News Report:
Headline: Economics – Ministry of Finance to Introduce Higher Excise Taxes
- Initiative to increase future financing of the budget
- Will increase taxes on alcohol, cigarettes, fuel, and growth in mineral extraction and export
- The increase is estimated to result in a R251.2-271.2B increase in revenues
- Tax burden will be on alcohol producers; taxes would increase by 30%
- This was expected, and could lead to a lesser burden on reserve fund (which may be already drained; deficit at 6.5% of GDP)
- Problems relate to the alcohol industry tax collection rates; currently only at 45%
Headline: Banks – CBR Warns Banks Against Deposit Rates Being too High
- CBR announced that scrutiny over the level of the deposit rates in the system needed to be increased
- Higher lending rates are due to smaller banks offering deposit rates that are too high; exacerbates the bad loan problem
- Loan affordability is related to the cost of funding for Russian Banks
- CBR should continue to stimulate reductions in deposit rates which would stimulate growth and lessen asset quality issues
From... Deutsch Bank Morning Comment:
Headline: CBR Expects Inflation to be Close to Zero in July
- Deputy head of CBR expects inflation to be close to 0% in July, and close to 0% in August
- Inflation in 2008 for July and August was .5% & .4%, respectively
- If inflation is 0-.5% MoM, we can expect YoY terms of 11.4%-12% for July
- Minster of Economic Development announced that they will reduce inflation target from 13% to 12-12.5%
From... Troika Dialogue Russia Market Daily:
Headline: Inflation at .2% over first six days of July
- CPI rose .2% between June 30 and July 6, same as a year earlier
- CPI not expected to exceed .5% for the month
- Increased was due to rising oil price and growth in tariffs
- Regardless, positive view on inflation this year, annual figure estimated around 10.5%
- Central Bank is expected to continue cutting base rates
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