Eurasia Business News – October 1, 2017

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Kotelnicheskaya Embankment Building, Central Moscow, 2015 – Photo credit : Eurasia Business News

“Growth above 2% is expected in the last quarter of this year”, told journalists the Russian Minister of Economic Development Maxim Oreshkin during the 8th Russian-Azerbaijani interregional forum held in Stavropol since 28 September.

“We expect a GDP growth of more than 2% over the third quarter. We had a growth by 1.8% in July, while in August – 2.3%. In September we expect growth above 2%. This will allow the national economy to show growth rates above 2% for the third quarter” explained the Minister.

Maxim Oreshkin added that Russian economy is expected to grow by more than 2%. “Yes [in the IV quarter growth will be above 2%], as announced earlier – all our expectations are preserved.”

“We reached the bar above 2% over the second quarter of 2017 […] May significantly improved the figure, and a GDP growth by 2% in the third and fourth quarter is a more solid figure. The calendar factor helped a lot as well as the cold weather factor, which helped over the second quarter. As the weather factor ended in the third quarter, the economy is now growing without temporary factors and therefore it looks more solid” explained the Minister.

Slowdown of inflation

Inflation in Russia will be 3.2% by the end of 2017 with a GDP growth above 2%, announced the Russian Minister of Economic Development Maxim Oreshkin during the first conference of the regional managers of the Vnesheconombank, reported the daily Vedomosti.

The Minister stressed that now inflation is 3.1% and by the end of 2017 inflation would reach 3.2%. Then the inflation rate will gradually increase up to 4%, which is the target level of the Bank of Russia.

The Minister added that due to low inflation, the problems of the banking sector became easier to see : “When inflation is high, interest rates are high, and the problems of the banking system are very easy to ignore. However, in a situation of low inflation, all the sins emerge”.

“In many respects, this is a positive effect of low inflation rate, as only those banks that are competitive, profitable and move forward will remain in the market”, concluded the Minister of Economic Development.

Central Bank reduced its rate

This sustainable slowdown of inflation led to the Bank of Russia cutting on September 15th the key policy rate by 50 pp to 8.5%, for the fourth time this year.

The Central Bank added that inflation expectations among the population and companies remain very high – 9.5%

In order to keep inflation close to the 4% target, it is necessary that inflation expectations do not react to sharp, but temporary changes in prices for goods and services most in demand by the population. The Bank of Russia expects that over the next six months fluctuations in prices for food products – the most volatile element of the inflation basket – will remain a source of inflation volatility.

In turn, the dynamics of food prices will depend on the quality and conservation of the crop of cereals this year which is expected to be a large one. Indeed, Russia is going to collect in 2017 a record grain harvest in the history, announced the Minister of Agriculture Alexander Tkachev: more than in 1978, when 127 million tons were harvested in the RSFSR, reported the daily Kommersant.

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