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National Economic Trends

      RBC, 10.12.2009, Moscow 11:52:12.Russia's foreign borrowings will be under $18bn in 2010, Deputy Finance Minister of Russia Dmitry Pankin told the 7th Russian Bond Congress in St. Petersburg today. The official explained that it was difficult to give a more precise figure, as it would depend on oil prices. That said, in total in 2010-2012, the ministry planned to raise some $60bn in foreign financing.

      Regarding the terms of borrowings, it is more profitable for Russia to offer long-term securities, but with the decreased discount rate it would be unreasonable because of future budget expenses. Russia will not be ready to venture out to the international debt market until March 2010, when the legal environment is to be finalized, he noted. Russia has abstained from borrowing on the international market for 10 years, which has had a negative effect on its image because of insufficient contacts with investors.

Interfax: Russia to settle debt to London Club by end of the year – Pankin

ST. PETERSBURG. Dec 10 (Interfax) - By the end of 2009, Russia intends to settle debt owed to the London Club, Deputy Finance Minister Dmitry Pankin told journalists on Thursday.

"This is not a large amount. We hope to settle it by year's end," Pankin said.

He also confirmed plans to finish an exchange of USSR commercial debt by the end of the year.

By Anastasia Ustinova

Dec. 10 (Bloomberg) -- Russia will sell its first Eurobonds in a decade “no earlier” than March, Deputy Finance Minister Dmitry Pankin told reporters in St. Petersburg today.

To contact the reporter on this story: Anastasia Ustinova in St. Petersburg at austinova@bloomberg.net

By Alex Nicholson

Dec. 9 (Bloomberg) -- Russia’s budget deficit widened to 4.9 percent of gross domestic product at the end of November from 4.7 percent the previous month as the government spent 1.76 trillion rubles ($57.5 billion) more than it collected.

Revenue in the 11 months through November was 6.45 trillion rubles, or 96 percent of the income the government targets for 2009, while spending was 8.2 trillion rubles, or 82.6 percent of forecast expenditure, the Finance Ministry in Moscow said on its Web site today, citing preliminary figures.

Russia expects a budget shortfall for the first time in a decade after crude oil prices tumbled, curbing state income. The economy of the world’s biggest energy producer contracted the most on record in the second quarter, shrinking an annual 10.9 percent, and fell 8.9 percent in the third.

“Every year we underspend appallingly and in December we always see a sharp spike,” Anton Struchenevsky, an economist at Troika Dialog, Russia’s oldest investment bank, said by phone. That may lead to “considerable volatility” in the ruble’s exchange rate, he said.

At the same time, Struchenevsky said he doubted that the ruble would veer far from a rate of 35 to 36 against the dollar- euro basket which Bank Rossii uses to manage fluctuations that can hurt exporters.

Russian companies are due to make debt payments of about $19 billion this month, which may act as a counterweight to budget spending and “sterilize the extra ruble liquidity,” he said.

The ruble was 0.3 percent stronger against the dollar at 30.4620 at 3:43 p.m. in Moscow and 0.4 percent stronger against the euro at 44.9004. Those movements left it 0.4 percent stronger against the basket.

To contact the reporter on this story: Alex Nicholson in Moscow at anicholson6@bloomberg.net.

Rencap
December 10, 2009

Consumer prices were up 0.1% in the first week of December, after zero change in the last week of November. Last year, inflation in the first week of December was 0.2%. Current YtD inflation amounted to 8.5%. We think that, during the remaining three weeks of the year, cumulative inflation could barely exceed 9%.

In November, the main contributors to CPI were prices for all goods which added 0.4% MoM. Services prices in November demonstrated insignificant growth (0.1% MoM).

We think that the drivers for the December price increase are still the same: traditional for fruit, vegetables and milk products prices, thus we are unlikely to see zero weekly inflation until the end of the year. An expected acceleration of budget spending in December is not reducing inflationary pressure. However, it should not be excessive as a significant part of the corresponding budget deficit is going to be financed via domestic borrowing and a return of deposits from commercial banks.

We agree with Central Bank of Russia (CBR) inflation estimates of 0.5-0.6% MoM in December and estimate that the YoY price change adjusted for the devaluation effect at the start of the year would be below 6.0%. According to indirect indicators, the real sector did not demonstrate a strong performance in November again, so, we think the CBR has enough arguments for further loosening of monetary policy and we expect the CBR's key rates to be cut by another 25-50 bpts by the end of the year.