The central bank (CBR) revealed its real GDP growth forecast for 1Q 2016. The available data (for January-February) suggest that real GDP may have contracted “only” 0.3% qoq in 1Q 2016, compared to almost zero growth in 4Q 2015, according to the CBR. Real sector data since the beginning of this year have surprised to the upside and been more resilient than we and the market expected. The CBR claims that some sectors have already adjusted to lower oil prices and managed to benefit from the weaker rouble and lower competition. In our view, the growth outlook (alongside the fiscal problems) has been the main concern for investors recently. A favorable surprise on the growth front may reassure investors, in our view. In its March survey, the CBR noted a further improvement in households’ inflation expectations. According to the March survey, the one-year ahead inflation expectation fell to 7.6% from 7.8% in February (estimate based on normal distribution). According to the median estimate, one-year ahead inflation expectations fell to 14.7% in March from 15.7% in February and its peak of 16.8% in January. The CBR emphasized that inflation expectations remained elevated despite this improvement. This emphasis suggests to us that the CBR is likely to stay cautious with regards to policy easing.
