Citibank Predicts Strong Comeback for Russian Economy (NYSE: C)

Citibank’s (NYSE: C) team of analysts raised its economic outlook on the Russian economy, predicting a 6.2% GDP growth rate as consumer spending speeds up.

Citi’s previous forecast for the nation of Russia predicted a 3% growth increase because of rising wages, but Elina Ribakova and Natalia Novikova, Citibank analysts in Moscow, wrote in a report emailed to clients today. Their most recent report predicts that real wages are set to increase by about 6 percent.

Rabikova and Novikova said that “We believe the economy will already have turned to growth in the first quarter, supported by a pick-up in household consumption.”

Retail sales rose in Russia during the month of January for the first time in a year as inflation began to slaw and improved wages boosted spending levels. Sales grew at an annualized rate of 0.3% and real wages increased by an annualized rate of 2.6% during the same month, according to Russia’s Federal Statistics Service. The inflation rate slowed to an annual 8%.

Russia’s central bank lowered their benchmark interest rate for the 11th time since last April on February 19th after previous cuts failed to spur significant growth in lending. Bank Rosii said on February 19th that domestic demand remained unstable and below pre-crisis levels despite recent improvements in industrial output and real disposable incomes.

Citibank said that “Loose fiscal and monetary policies will, in our view, stoke domestic demand and inflation, forcing the central bank to allow ruble appreciation” during the second half of the year.

The report also predicted that the Russian ruble will strengthen to about 34 against the euro-dollar basket.

Russia’s GDP shrank by an annual 2.2% during the last quarter according to ING Bank NV, compared to an 8.9% decline in the third quarter and a record-breaking 10.9% decline during the second quarter.



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