Currency revaluation: Minek’s forecast was considered too optimistic

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In 2021, the average rate of the Russian currency against the dollar will exceed the forecast of the Ministry of Economic Development and will be in the range of 74-77 rubles, not 73.3, as the department estimated. This opinion was shared with Izvestia by analysts of rating agencies and banks… The ministry’s expectations for inflation of 4.3% by the end of the year also seemed overly positive to them: taking into account the current situation, the price growth rate could reach 5.5%. Most of all, imported goods and gasoline will rise in price. The corrected forecast of the department (Izvestia has) has already been approved and will be taken as a basis in the budget process

With a new course

The Ministry of Economics has updated the forecast of the socio-economic development of Russia, sources in the department told about its scenario conditions to Izvestia… The biggest change was seen in inflation expectations, the ruble exchange rate and oil prices. So, it is assumed that price growth at the end of 2021 will be 4.3% – this is 0.6 p.p. more than was included in the September forecast and by 0.3 percentage points. exceeds the target of the Central Bank. The deterioration of the forecast is associated with the acceleration of consumer prices, namely, the rise in prices for food on the world markets, explained the interlocutor of Izvestia. At the same time, without the measures taken to contain the cost of wheat, sunflower and sugar, inflation would have been even higher and reached 4.6% – their contribution in the department is estimated at 0.3 percentage points, the source explained.

The Ministry of Economic Development revised the dollar exchange rate for the better: it will be 73.3 rubles on average for 2021… The department associates the weakening of the national currency at the beginning of the year with psychological factors: fluctuations of this period do not reflect the fundamental level, the source explained. According to the ministry’s forecast, by the end of 2021, the dollar will cost 71-72 rubles. Moreover, in 2022 the average rate will be 71.8, in 2023 – 72.6, and in 2024 – 73.6 rubles.

Oil price expectations also underwent significant adjustments: the average annual forecast for Urals in 2021 was immediately raised by $ 15 to $ 60.3 per barrel.… The situation on the market made it possible to improve the indicator, the interlocutor of Izvestia noted. For example, in March the average price of a barrel was $ 63.6, which is twice as high as a year earlier. However, further decline in prices is inevitable: this will be a consequence of the gradual withdrawal from the OPEC + deal. In 2022-2024, the Minec expects $ 56.2, $ 54.8 and $ 54.2 per barrel.

Wherein the real disposable income of the population was left unchanged by the department: they will have to increase by 3% at the end of this year and by 2.4% in the next… But the indicator of real wages was revised for the worse: from 2.2% growth to 2%. Unemployment will be 5.2% at the end of 2021 and will decline to 4.7% next year.

The GDP forecast has also been adjusted – the department lowered it by 0.4 percentage points. from 3.3% to 2.9% in 2021… The reason for this was the results of 2020, which turned out to be better than expected (GDP fell by 3% instead of 3.9%) – the smaller the decline, the weaker the rebound, the source explained.

According to the source, familiar with the situation, Deputy Prime Minister Dmitry Grigorenko instructed the relevant federal and regional authorities to use the scenario conditions of the updated forecast in the upcoming budget process

Have gained optimism

Izvestia asked leading economists and analysts to evaluate the department’s new macro-forecast. Many of them said that the expectations of the Ministry of Economics were too positive, especially regarding the dollar exchange rate.… According to NRA managing director Sergei Grishunin, the agency’s forecast does not include a geopolitical component. BUT if the existing tension does not subside, the average exchange rate of the national currency against the dollar for 2021 will be about 76-77 rubles

Andrey Kadulin, the head of the analytical department of Bank Saint Petersburg, also supported the opinion that the rate was undervalued.

We have a positive view of the prospects for the Russian currency, but we do not think that the rate will stabilize significantly below 73.5-74 rubles / $… And given the geopolitical pressure, it can stay in the range of 75-76 rubles / $. As a result, the average annual exchange rate is more likely to be in the range of 74-74.5 rubles / $, he is sure.

Inflation expectations also fueled controversy. The agency’s forecast is obviously optimistic: measures taken to curb price increases may not be enough to bring prices down to 4.3%, said Freedom Finance analyst Evgeniy Mironyuk. At the same time, tightening control may lead to a limitation of production activity in the agricultural sector, he warned.

According to the calculations of the NRA, inflation this year will be 5.5%, as the balance between disinflationary and pro-inflationary factors remains in favor of the latter, noted Sergei Grishunin. In particular, these include the lag in the growth of supply from the recovery in demand, an increase in world prices for raw materials, a shortage of labor, and growing costs of producers. Therefore, this year, Russians will see an increase in the price of imported goods by 8-10% due to the devaluation of the ruble, as well as gasoline against the background of rising oil prices (by 3-5%). At the same time, the inflationary risk in the foodstuffs sector has already practically materialized, so they will rise in price at a rate of 2-3%, the expert predicted.

The inflation rate is decreasing more slowly than expected by both the market and the authorities, so its acceleration at the end of 2021 is likely to be higher than the forecast, said Anton Tabakh, Managing Director for Macroeconomic Analysis and Forecasting at Expert RA. However, in general, he considered the expectations of the Ministry of Economic Development to be quite weighted, including in terms of real incomes of the population. Reaching the level of 3% or even slightly higher will be facilitated by economic recovery and restrictions on the influx of migrants, the expert believes.

The expected measures to support the population should be sufficient to support real disposable income growth of 3%, says Maxim Petronevich, senior economist at the Otkritie Research analytical department. However, much will also depend on the recovery of entrepreneurial income.

If Brent quotes remain in the $ 60-70 corridor, and the geopolitical situation does not deteriorate, especially in terms of the introduction of new sectoral sanctions, Minek’s forecast is quite realizable this year, Dmitry Babin, an expert on the BCS World of Investments stock market, is optimistic.