© Natalia Novikova
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Natalia Novikova
Economist at Citigroup, Russian Federation
V. Putin with 63.8% of votes won the presidential election in Russia, which took place on 4 February. How will the Russian economy and the Ruble be affected by these political changes? Will there be any improvements in Russian business environment? In order to get an overview of the current economic situation in Russian Federation and its prospects, Dukascopy decided to conduct an interview with Natalia Novikova, an Economist at Citigroup.
How would you evaluate the current economic situation in the country?
It is broadly stable now. However, we should remember that Russia is highly dependent on oil price; therefore the strong growth in internal consumption is mostly driven by high revenues on the fiscal side, which supports the private consumption before the elections. Once these factors are over, we expect a slowdown. For this year we anticipate that GDP growth will shrink from 4.3-4% to 3-3.5%.
What will be the drivers for this slowdown?
First of all, we think that the global stagnation will lead to a lower export volume. We will also see slowdown in household consumption in the second half of this year after pre-election demand is over. Finally, there is a limited space for public expenditures to grow; therefore we have no major support from this source in 2012.
Do you anticipate any significant changes in Russian business environment after Vladimir Putin's victory in the presidential election?
I would not expect any major changes in business environment in the short-term, as there is no trigger for this.
What is your forecast for the Russian Ruble?
Now we have a very strong Ruble as compared to fundamentals. Our forecast is that by the year end we will see the Ruble weakening. We should remember that the first quarter and even first half of the year is seasonally strong current account for the country, with energy sector accounting for 70% of total exports. Even if current outlook remains stable, I think these two trends decrease surpluses of current account and continues capital outflow, they should lead to slight currency weakening in the second half of 2012. Now we see Ruble basket is trading at $33.5-34, I would expect the Ruble trading at close to $36-36.5 by the year end.