S&P upgrades Russia’s economic outlook for 2021

S&P Global Ratings expects Russia’s economic growth to reach 3.7% this year. The agency has upgraded its previous forecast of 3.3%, published in March.

The New York-based ratings agency expects the Russian economy to grow by 2.5% next year, while projecting further growth of 2% in 2023 and 2024.

The forecast for Russia’s economic growth has been raised due to “faster-than-expected recovery in domestic demand” thanks to the easing of Covid-related restrictions, it reported.

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Moreover, the agency mentioned strong consumer lending as one of the reasons for the forecast upgrade.The analysts highlighted that the extended program of preferential mortgage loans would support demand in the country’s housing market.

An expected increase in oil production amid the potential easing of supplies caps under the OPEC+ deal will result in a surge in oil exports this year, as well as in 2022.

According to S&P analysts, inflation in Russia rose to 5.7% in 2021, and is expected to drop to 4.1% next year, and to a target of 4% in 2023 and 2024.

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The agency expects the Russian central bank to tighten its monetary policy this year. However, potential impact of a worsening pandemic could influence decisions on whether to move the key interest rate into the restrictive zone of above 6%.

Earlier this month, the regulator raised its key interest rate by 50 basis points to 5.5%, saying that more hikes would be needed to rein in high inflation.

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