Russian Economic News Wednesday July 15, 2009

Summary:

• Ruble depreciation attributed to declining oil prices – budget deficits and tight liquidity may possibly prevent acceleration of depreciation
  
• PPI has increased significantly over the past month signaling a build up of inflationary pressure.

From... Troika Dialogue Russia Market Daily:

Headline: Ruble Depreciation May Half as Excessive Free Liquidity Evaporates

• Recent ruble depreciation triggered by declining oil prices
  
• The increase exchange rate sensitivity to oil prices is connected to the ruble liquidity injection through budget channels
  
• Budget ran a significant deficit in June, banking accumulated more than R1.1T in deposits
  
• Since banking system is demonstrating increased demand for rubles, and oil prices are increasing, ruble is not expected to fall dramatically
  

From... Business New Europe Daily News Letter:

Headline: PPI Hits 2.2% in June

• PPI Growth points to a build up of inflationary pressure – producer prices increased by 2.2% MoM – significantly over the 1.3 MoM estimate
  
• Suggests that the inflationary pressures have stared to build up
  
• CPI rate has lagged behind closing at 7.4% YTD
  
• Oil and Gas prices push PPI up – wholesale prices rose 14.3%
  

  
  

Russian Economic News Thursday July 9, 2009

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