Global growth remained disappointing in the second quarter of 2016. Oil prices strengthened following OPEC’s announcement of likely production cuts. The ruble gained by 2.4 percent.
Inflation eased in September, down to 6.4 percent in September from 6.9 percent in August. The Central Bank cut its key rate by 50 basis points to 10 percent. The banking system remains stable, but credit growth is limited.
Aggregate output expanded in August by 0.6 percent, y-o-y, the second positive reading in 2016, supported by growth in industrial production and agriculture, as well as lower contraction in construction. Labor market dynamics also improved slightly.
The federal budget primary deficit increased to 2 percent of GDP from 1.1 percent last year as shrinking oil revenues outweighed lower government expenditures. Draft amendments to the 2016 federal budget suggest a further drop in revenues and increased spending on social policy and an undisclosed part of the budget.
On September 27, Russia placed an additional issue of 10-year Eurobonds, with a lower effective yield of 3.9%, compared to the 4.75% of the May 2016 issue.
Privatization of the oil company, Bashneft, is expected to be resumed, with Rosneft, Russia’s largest crude oil producer, expected to participate in the privatization.